TransAct Technologies(TACT) IPO’ed on the capital markets on August 22nd, 1996. Thirty years later, the shares of TACT trade at roughly $5/sh, below levels the stock reached in the late 1990s. A shareholder who invested in 1996 and held for three decades has, in share-price terms, essentially nothing to show for it.

Even though TransAct now houses a litany of undervalued and strong assets, the share price hasn’t reflected this reality, in part, we believe, because of what we believe are failures of board oversight and capital allocation. Therefore, we are releasing this piece demanding for changes on the board of directors to address some blatant conflicts of interest and governance failures, as well as pushing for a different strategic review approach than the one currently undertaken by the board:

1. The board’s current value generation lever is to explore the sale of their casino and gaming segment. Typical value generation moves are the selling/divestment of the non-core or even lossmaking divisions of the company. In this case however, TACT has hired an investment banker to seek strategic alternatives such as selling its core, cash generative casino business, effectively leaving shareholders with the Food Service Technology segment, a segment we believe to be lossmaking, along with corporate overhead and, in our view, limited standalone growth prospects
   
   

2. Therefore, the action that is in best interest of all shareholders is to prioritise the immediate sale of BOHA!/FST segment above the sale of Casino via the hiring of an additional investment banker to carry out a strategic review of this segment. We think it is extremely crucial to facilitate the selling of the FST/BOHA! segment either first or at the same time as Casino rather than after because the negative cashflow and the corporate overhead of a standalone public company will run the company to the ground if FST is left for shareholders to bag-hold.
   
   

3. Moreover, even if the board does intend to sell BOHA! After the casino segment’s sale, the negative cashflow shortens the runway the board has to execute a sale while still preserving value and in the worst case can result in value destruction if the board can’t find a buyer for BOHA! Therefore, to hedge against the risk of the FST either being unsellable or it being the remainco and destroying long-term shareholder value, we strongly advise the prioritization of BOHA!’s sale first
   
   

4. We specifically ask to hire an additional investment banker so that the two sale processes can have 0 overlap with each other in case both the companies need to be sold: if the board auctions the company as a single piece, the highest bidder would have factored some amount of conglomerate discount. However, due to the unusual separability of the two segments, it should be easy to sell the company in two pieces, or more crucially, sell the FST/BOHA! segment first
   
   

5. We request the cleaning up of certain conflicts of interests and governance failures at TACT: Two of TACT’s six directors, Emanuel Hilario and Haydee Ortiz Olinger simultaneously serve on the board of ONE Group Hospitality(STKS). We believe this can be a breeding ground for conflicts of interests because TACT sells products to ONE Group. The co. ‘s proxy disclosed sales of food service technology products to STKS in both 2025 and 2024. Mr. Hilario is not simply a director of STKS; he is also the President and CEO and his disclosed economic stake in STKS is many multiples of his holdings in TransAct
   
   

6. Another example of Governance concern is that the body tasked with policing relationships like this(TACT’s Related Party Transactions Policy) is administered by the audit committee, which is chaired by Mr. Hilario himself: The Chief Executive of the related party whose transactions the committee is tasked with scrutinizing!

7. Ms. Olinger, who is the chairman of the board with just a 0.3% ownership of the company’s shares outstanding is part of the two-person bloc interlock in which the other company is a customer of TACT. This makes us believe that she is unfit to be the chair of the board. Thus, we recommend that Mr. Dan Friedberg be the chairman of the board because of his substantial 10% stake in the company, allowing his interests and that of the shareholders be aligned and hopefully lead the board to facilitate the immediate sale of the BOHA! segment.
   
   

8. We recommend the addition of one or two directors to the board with deep knowledge of both the BOHA! and casino businesses. We call upon the board to consider Bart Shuldman as we believe that he is the right candidate to execute a quick selling of the BOHA! unit to the right strategic buyer at the highest price, as well as the casino segment since we think his ideas of the company’s future aligns with what is in the best interests of the shareholders. Moreover we also ask the board consider the removal of other incumbent non-incentivised members; Fix the governance problems and conflicts of interests entrenched within the Board, and to refocus the current efforts of a strategic review to sell the BOHA! segment first instead of/in addition to the selling of Casino, rather than vice versa.

   
   
   

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Business Primer: TransAct Technologies is an undervalued company trading at about 0.7x EV/Sales

We have exposure to TACT shares because it is a real business with undervalued assets which we value much more than its current Enterprise Value. Here is our base case valuation exercise with multiples we believe are reflective of what strategic buyers would pay for the casino segment:

And these are our valuation tables for the BOHA!/FST segment:

Adding all the back-of-the-napkin valuations gives a blended valuation of the business at 100M to 134M. This represents an 80% to 148% gain in market cap relative to current valuations.

The valuation multiples used above are what we think a strategic buyer would pay for the businesses separately, where they would pay a fair valuation/slight premium to seek synergies out of the businesses. Keeping this in mind, we, the authors of this analysis, think that management and the board have, in our opinion, failed to pursue the value-unlocking moves available to them, and we believe the conflicts of interest and governance failures described below help explain why..

Our stance on what the board should do with the company: Urgently prioritise putting up the BOHA! Unit up for sale via the hiring of another investment banker first instead-of/in addition-to its Casino strategic review to drive an 80%-140% return

Concurrent to our valuation exercise in the first section of this piece, we can clearly see how the SOTP of TACT far outruns the valuation the market is assigning it right now. With valuation gaps this big, the most effective activist lever to be pulled is to sell the businesses to a strategic buyer using the below valuations as a proxy for how much we think it’s worth:

The company is already pursuing a strategic review of its Casino/gaming unit with Bank Of America searching for a buyer. However, if this sale goes through, shareholders would then be left with the FST/BOHA! segment, which we believe operates at a loss and would be left carrying the corporate overhead. While the sale of the Casino business can be value accretive in the short-term, shareholders would be left bagholding an asset the market will likely punish long term. Even in the scenario that the board intended to sell BOHA!/FST segment after the sale of casino, this would mean that the time in between would result in nothing but an erosion in the company’s cash balances because of the new corporate overhead and the negative cashflow- making it all the more dangerous in the case that the board can’t find a buyer for the FST segment.

However, BOHA! can attain a reasonably rich valuation if it is sold to a strategic buyer, as they will be acquiring approximately 21,800 active BOHA! units per the company’s Q2 2026 reporting - which can be an extremely value accretive asset to a strategic buyer. Therefore, we highly recommend that BOHA!/FST segment be put under strategic review under a high-priority mandate and have it sold immediately for about 30-45 million dollars. We ask that either BOHA! gets sold and Casino stays, or both companies are sold under separate, parallel strategic reviews instead of shareholders being stuck with what we believe is a lossmaking segment that would erode the company’s net cash over time.

It is crucial that TransAct and the board hire an additional investment bank to conduct a strategic review of BOHA! instead of the same review for both casino and BOHA!. While the selling of both companies does make it a whole-company sale in effect, offering both unrelated pieces servicing customers at pole-ends of the economy can result in the highest bidder factoring some conglomerate discount into their bid. Therefore, to make sure BOHA!/FST segment as well as the Casino segment reach their full, rich valuations, they will have to be auctioned in completely different, parallel markets.

A great precedent of what we think TACT should do is made of two examples: Meredith and Kaman. Meredith did a simultaneous two-buyer breakup where they sold Local Media Group to Gray Television while the digital business was scooped up by Dotdash:

This is what we believe a dual strategic process would look like if TACT did it: Meredith’s break-up and parallel sales returned approximately $59.17 per share in cash to shareholders in total, by our estimate roughly 80% above the undisturbed pre-announcement price.

In case that the newly elected board decides that it is better to prioritise the selling of FST/BOHA! First and only then concentrate on the selling of Casino, we believe that if done right, the product of the strategic reviews would look like Kaman: it sold its Distribution segment to Littlejohn in 2019 and then sold the remainco to Arcline in 2024 at roughly a 105% premium to the prior close:

The Casino segment will attract buyers such as JCM Global, Nanoptix, Light & Wonder, IGT and Everi, Sega Sammy, Star Micronics, and Bixolon while the FST/BOHA! segment will attract acquirers such as PAR, Toast, Crunchtime, Restaurant365, Ecolab, Zebra, Brady, distributor tech arms, and restaurant software sponsors. The acquirers come from completely different backgrounds, so the strategic reviews can be conducted in parallel. In contrast, if a singular acquirer such as a private-equity firm approaches the board for an acquisition, they will mark down the assets lower than what they can be sold off individually. Moreover, given how separable the two businesses are because of the complete lack of synergies between them, it is entirely possible to initiate a dual, parallel strategic review for each of the assets

Governance concern #1: The Chair of the board of directors is in conflicted interests to create shareholder value and suffers from a two-person Board interlock

TransAct Technologies has a six-member board of directors:

• Haydee Olinger: 0.3% owner and the Chair of the Board of Directors

• John M. Dillon: 3.3% owner

• Randall Friedman: 0.21% owner

• Emanuel Hilario: 0.28% owner

• Audrey Dunning: 0.19%

• Dan Friedberg: 10% owner

Emanuel Hilario and Haydee Olinger together are also board members of another publicly traded company called The ONE group hospitality(STKS). Moreover, their economic stakes in STKS are about 25x and 1.5x times their stakes in TACT, with Hilario being the CEO and President of STKS:

Therefore, we cannot imagine a scenario where Olinger and Hilario are rightly incentivised to act in the best interest of the shareholders of TACT when they both are, together, sitting on two boards serving the fiduciary duty of two different shareholder bases and their economic interest to STKS is many multiples times that of their stakes in TACT, all the while Hilario serves as the CEO of STKS. A Board interlock where more than one board member(one of whom chairs the board of TACT) together serves on another company’s board while the latter company is a customer of the former is a red flag we want resolved urgently, and it is extremely saddening to see that TACT suffers from it.

Governance concern #2: The related party transaction and audit committee

As it was established in the last section, Hilario is the CEO of STKS as well as a director of TACT. We’d imagine that their interests are more aligned with that of STKS than that of TACT due to the magnitude of the difference of their stakes in each company. Unfortunately, our intuition that we would find some physical manifestation of this conflict of interest via related party transactions was proven true:

TACT sells products to The One Group Hospitality headed by Hilario. While the dollar amounts may seem immaterial, it is a testament to the long-standing phenomenon that has led to the conclusion that having a two-person board block in two public companies simultaneously can create massive conflicts of interest and it is hard for the board members to serve the fiduciary duties of both(in this case, in our opinion their economic incentives tilt toward STKS rather than TACT):

The directors of a company have a fiduciary duty of loyalty towards its shareholders and if the Chairman of the board holds a higher economic stake in another publicly traded company, as well as another board member being the CEO of that same company, shareholders are entitled to question whether undivided loyalty is realistic within such a structure. Even more egregiously, the audit committee that is supposed to police conflicts of interests and align the incentives of the directors along with the shareholders’ best interests is chaired by Hilario himself, a structure that, in our opinion, cannot credibly police itself:

Shareholders of TACT deserve better directors whose economic interests are aligned with value created in TransAct holdings and we demand a board sweep. More in the section below

The fix: The addition of at least one or two directors with deep expertise on both casino and FST markets to facilitate the sales. Our personal boardroom election pick is Mr. Bart Shuldman

We want people with real economic stake in the business who aren’t entrenched on the boardroom of another public company but also know the business in and out enough to know exactly who the right buyers for the FST/BOHA! business are on the boardroom, as well as someone who, in our view, would prioritise divesting BOHA! given what we believe are its capped growth opportunities (outpaced, in our view, by competitors such as CrunchTime) and its cash consumption. Therefore, we recommend the addition of a few, shareholder-friendly strategists who know the two business segments inside-out to facilitate the sales.

Mr. Shuldman was the CEO of TACT for 27 years from 1996 to 2023 and we don’t believe there is anyone alive that knows the business better than himself at the current moment. Mr. Shuldman was the person who brought the BOHA!/FST unit into TACT’s casino business, and things were going amazing…until Covid-19 hit.

After headcount cuts and a liquidity crunch, TACT lost the ability to invest earnings into BOHA! and in that time, we believe it was surpassed in market penetration by competitors such as CrunchTime, and faces an uphill path to reclaim it. Below is an excerpt from Mr. Shuldman’s public shareholder letter commenting on the FST segment falling behind:

However, that is BOHA!’s software part. BOHA!’s physical terminals are still industry-standard and his public letter describes the BOHA! terminal as among the leading hardware platforms in food service, an asset we believe can command real value from the right strategic buyer. We believe Mr. Shuldman would be well placed to oversee a high-priority sale of BOHA! to the proper strategic buyer, rather than letting the company become the bag-holder of what we believe is a lossmaking asset once Casino is sold first. For clarity: Mr. Shuldman has not endorsed this publication and has no connection to its authors, and his public letter does not call for a sale of BOHA! That request is ours alone.

Moreover, his communications to TACT shareholders in his open letter citing how in 2023 the company retained 3 investment banks to evaluate strategic alternatives showed that the separation of the business into two entities would unlock a substantial amount of value. Bizarrely, this was never realised and we think that Mr. Shuldman is as shocked as we are:

Therefore, given that his deep industry knowledge of being in the field for almost 30 years gives him the increased ability to conduct a sale of the BOHA! unit as well as his pessimism of the BOHA!/FST segment becoming the core business(reading between the lines in his shareholder letters), we think that there is no better candidate to be elected onto the board than Mr. Bart Shuldman.

The fix #2: Consider the choosing of Mr. Dan Friedberg as the Chairman of the board

Out of all the directors on the board, Mr. Friedberg is the only one who owns a substantial stake in the company. He runs 325 capital, a hedge fund which is the vehicle through which he owns a 10% stake in the company. We are shocked that someone who is part of a two-person bloc interlock with a customer of TACT’s with just 0.3% ownership of the company is chairing the board, while Mr. Friedberg who is obviously more incentivised to create shareholder value isn’t.

We believe that, because of his large stake, his incentives align with those of shareholders and he will push for a sale of the BOHA! segment immediately if he were chairing the board, as that is the only logical course of action that benefits both him, 325 Capital and the shareholders. Given that 325 Capital labels itself as a ‘constructive’ partner to boards focused on driving shareholder value in companies, we think that if Mr. Friedberg was handed control on the board’s major decisions, he would do everything in his power with 325 Capital to realise the sheer value trapped inside TACT’s equity. Disclosure: Mr. Friedberg has not endorsed the publication of this piece and has no connection to the authors.

After researching TransAct Technologies in full, we have the following asks to the Board to drive shareholder value:

1. Hire another investment banker to conduct a strategic review of BOHA!/FST segment to hedge out any possible conglomerate discount and to get the best possible prices aimed at strategic buyers

Chuck Gillman’s recent public Schedule 13D filings press for an urgent review of the BOHA! Business:

We demand from the board that this review result in an immediate sale of the BOHA!/FST segment rather than, say, a capital raise for re-investments in the segment. Right now, while the board has put up the Casino segment for sale via a strategic review with BofA, the success of this deal means that shareholders are left with what we believe is a lossmaking segment carrying millions of dollars of corporate overhead. This is value destructive for the shareholders, as the cash received by this deal would evaporate in no time because of the cash-burn of BOHA!/FST in addition to the corporate overhead. The best thing that aligns with the interests for all shareholders is to do a parallel strategic review of the BOHA!/FST segment as well.

As stated before, BOHA!/FST, while lossmaking in our view, is still rich with the potential to be a valuable asset to someone because of its approximately 21,800 active terminals. However, it is crucial that the board doesn’t take our suggestion the wrong way and put the whole company up for sale as one unit: if the board doesn’t hire another investment banker to implement the sale of BOHA! separately(as in, if they try to sell the company as one piece instead of two), shareholders risk having a conglomerate discount being priced into the highest bid. However, with a new prioritised strategic review process by another banker on BOHA!/FST, before/in-parallel to the sale of the Casino Business, the search for a buyer can yield the business being sold with a higher multiple, especially if the able Mr. Shuldman takes the reins of the task of selling BOHA!

We highly advise an immediate sale of the BOHA!/FST segment before/in parallel to the strategic review sale process of the Casino segment via the hiring of an additional investment banker to preserve its multiple with the search of a true, synergistic, strategic buyer.

2. Consider the appointment of Bart Shuldman to the Board of Directors at TACT as part of a roster of new directors with deep industry knowledge

After screening for candidates with the right business acumen for these industries, deep knowledge of the company and its natural buyers, and properly aligned incentives, we believe Mr. Shuldman is the natural candidate to lead the board of directors at TACT. His stake in TACT as well as his firsthand public disclosure that three investment banks’ analysis showed a separation could unlock substantial value make us think that there isn’t anyone else that carries as much knowledge about the businesses of TACT and acumen to sell the assets to the right strategic buyers and also is aligned with driving shareholder value in the world.

We want Mr. Shuldman, or at the very least new capable directors on the board to help with a dual M&A Process where FST/BOHA! is sold first to extract value out of the company for shareholders because of his deep industry knowledge

3. Consider the appointment of Dan Friedberg as the chairman of the board because of his aligned incentives with shareholder value instead of the incumbent 0.3% owner and board interlock participant Ms Olinger.

Mr. Friedberg, being the largest holder of TACT stock within the board of directors is economically incentivised to do right by shareholders, which in this case is letting go of the BOHA! segment via a sale through the announcement of an immediate strategic review by engaging a separate investment bank. Because of his large 10% holding, we do not see anyone else on the board of directors that is fit to be chairing the board because of the lack of incentives to do right by shareholders

We want Mr. Friedberg to lead the Board of Directors and lead the company through a dual M&A Process where FST/BOHA! is sold first to extract value out of the company for shareholders

4. Fix all the Governance issues and the conflicts of interests that entrench the Board

Whoever is chosen to lead the board of directors, there is still a huge elephant in the room that has to be treated: the board is entrenched via a board Interlock, with two directors being on the board of ONE Group Hospitality creating massive conflicts of interests because ONE group is a customer of TACT. Moreover, it is extremely bizarre that one of those directors is Chairing the audit committee for Related Party Transactions, while serving on the board of the counterparty to that related-party arrangement.

We want such conflicts of interests sorted out so proper corporate and ethical governance can return. We suggest electing capable, shareholder-friendly board members such as Mr. Shuldman to the board and Mr. Friedberg as the chairman instead of the incumbents so the company can be led into a clean, dual auction to sell off its operating segments for the best available price to strategic buyers

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MNDY is a project and workflow management software made for enterprises and has been punished by the market for fears of AI taking its lunch, with shares having fallen 70% in the past year:

It now trades at a multiple of 2x EV/Sales, a pittance for a SAAS stock

Summary:

• Analysts and equity research reports are under the impression that the rise of AI will take away Monday’s moat and its existence as a workflow management software for enterprises.

• Analysts model a severe growth deceleration in revenues in the next two years, and we think that MNDY’s 1Y -70% share price performance and current valuation is pricing in a future of 0 terminal value and existential fears

• Our research indicates that it is more likely that MNDY’s growth accelerates in the next two years because of the rise of agentic AI

• The same way people thought AWS would kill SAAS businesses(but instead strengthened it), we think agentic AI deployed by enterprises will depend on workflow/project management solutions such as MNDY. MNDY has gotten something of a first mover advantage and has made its applications compatible for AI agents to be run by.

• This is a stark contrast to analyst models, and while our analysis does indicate a chance that AI does kill MDNY’ s business model, we think that the current valuation reflects that the market prices that possibility at about 100%, while we think it is more like 30%.

What the street thinks

Analysts are under the impression that MNDY will go through a rough growth deceleration due to AI eating up their lunch. As per Guggenheim’s recent analyst report, large customers of MNDY are certain that there are no short term displacements in the contracts MNDY holds, but the long term remains uncertain:

As such, Guggenheim is projecting a 19% and 17% YoY Growth respectively for MNDY revenues. This problem of investor pessimism was exacerbated by a CNBC video where MNDY was ‘vibe coded in 15 minutes’ using Claude, further depressing MNDY’s valuation:

The untrained investor may look at this interview with shock and sell his MNDY shares predicting a SAAS doomsday as they fear AI will someday take MNDY’s lunch.

What we think

MNDY is a state-of-the-art workflow management platform trusted by thousands of customers. An impressive thing about MNDY is its high switching costs. While this does not translate to improvement in revenue growth rates, it still does well to call out the stupidity in MNDY’s stock dropping by more than half.

We spoke to a [small] MNDY customer, and they expressed that while they don’t have plans to switch out of MNDY anytime soon, it would be a huge hassle even if they wanted to.

This is because of how deeply rooted MNDY’s platform becomes in a company’s infrastructure, with switching to other platforms needing external platforms such as movebot or outright paying developers to transfer the APIs to other platforms securely. Larger customers with complex workflows would struggle even more to migrate, exacerbating MNDY’s ‘moat’.

However, the primary reason we think that MNDY shares should command a little bit moore of a premium valuation is a mere probability exercise:

• The market, as per us, is valuing MNDY as if it has about a 90% chance of terminal risk, due to it trading at low valuations at 2x EV/sales, while normally SAAS trades at 4x. While this is due to fears of AI adoption, we will prove below how the possibilities of these materialising is way lower than what the market expects

• Agentic AIs, when deployed by enterprises, will need a co-ordination layer. Enterprises will never ever just give up the whole company’s operations to AI; it will be a collaboration exercise between humans and agentic AIs. We think MNDY stands to gain as an integral collaboration layer.

• MNDY is moving on to a subscription + consumption based hybrid pricing model, where the vanilla MNDY’s uses will be accessible for the same per month pricing,k but AI agentic usage will cost extra. This causes MNDY to potentially gain revenues from existing and new prospective customers, as the chances of existing customers switching out en masse are extremely low, especially if they are large enterprises.

• Hubspot CTO essentially validated our thesis that AI will indeed need a co-ordination layer(although he might be a little biased)

The market is punishing MNDY and other SAAS names because of fears of AI adoption and displacing MNDY. Moreover, that little stunt and CNBC where the hosts vibe coded a MNDY clone doesn’t mean anything. I could make a react.js clone of facebook but that doesn’t mean my application will displace facebook: Merely because facebook already has embedded users.

Moreover, IBM Recently published a paper called “The blueprint for agentic operations: How to build an interconnected enterprise”, clearly stating a need for workflow managers:

The main takeaway should be that if enterprises do really want to use Agentic AIs in a meaningful way(which is clearly what the market is predicting will happen with MNDY’s depressed valuations), an orchestration layer as a governance tool and workflow management is absolutely essential

Moreover, the idea above of a ‘digital twin’ already exists in MNDY’s roster:

So, therefore, with the apparent need of an orchestration layer and a digital twin, we think that the market is understating MNDY’s potential importance to enterprises for driving widespread agentic AI adoption.

The beauty of MNDY that it has agentic AIs enabled in its platform. It has the capability to let external agents (such as manus) as well as agents hosted in the platform to use the workflow management platform. This pivot into an ‘AI Operating system for enterprises’ is what makes us bullish on MNDY.

Moreover, something we(and the CEO of MNDY) can agree on is that vanilla SAAS pricing models are dead. MNDY’s CEO shares the same view in this podcast he did:

We think this is the step in the right direction. Given that right now, MNDY’s pricing is hybrid, enterprises will likely use MNDY’s agentic AI offerings at some point if the threat of AI is truly real. This should be tailwinds of some sort to MNDY, as a new revenue stream should be created from present customers as it is unlikely a huge amount of them will switch out to other platforms, and instead would opt to use MNDY’s AI offerings, in addition of course to future prospective revenues.

While this might be a biased take, HUBS CTO purchased about 1.8 million dollars in HUBS shares, and this was his thesis:

Link to whole tweet here. We think Dharmesh knows better than us and more than most people. He here is talking about the same orchestration layer we read in the IBM paper, and we think experts hinting at the need for MNDY’s offerings(indirectly) is bullish, and while AI risks might be real, the risk-reward is in might be in our favour.

Final checks before pulling the trigger

• Talk to competitors how good MNDY is

• Will enterprises truly adopt orchestration layer?

• If orchestration layers are to be adopted, who is gaining the most? HUBS? ASAN?

Any subscriber with expertise or insights on this name, please email me.

In fact, this will be a regular theme from now on. As long-time readers might know, Ragnarok has two divisions: Ragnarok L/S and Ragnarok Quant. Today, we introduce a new division called Ragnarok Activism: Covering securities where management does NOT have total voting rights, and an activist could drive meaningful change. More writeups of this genre for paid subs coming soon!

As for today, we found a 100 million dollar company with a net cash position of 37 million with no debt, and with a strong core business that did about 175 million dollars in revenues in 2025. This core business is a recognisable and popular brand in its niche.

So, what gives? Why is the equity trading at depressed valuations despite an ultra-strong balance sheet and income statement?

It all boils down to management.

By splurging capital on useless acquisitions and deteriorating the bottom line via bloated cost-bases of the new acquired businesses, management has created an illusion of a deteriorating, rapidly loss-making company. Moreover, management has let the share count almost continuously, and have not made satisfactory efforts to return cash to shareholders, except a measly dividend.

Ragnarok Research believes that by a few simple fixes, shares could trade atleast 60% higher than where they trade right now, and any activist firm could undertake this task and bring about change.

By enacting an asset-sale or a divestiture of the non-core assets and using proceeds/savings for a buyback, in addition to conducting a strategic review to sell the core brand(getting the company acquired), we think meaningful share price appreciation could occur.

In case a buyer for the whole company(core business) cannot be found, proceeds form divesting non-core assets along with a portion of the net cash position can be used to sustain operations and fund growth.

In order to express our opinion, we have made a powerpoint presentation highlighting our thesis:

Below is our opinion on why CLAR needs an activist intervention and would trade meaningfully higher.

As for how we are sizing this(as we are not going activist on this, but still appreciate the hidden value that lies with the security), I am allocating 5% of my portfolio to this trade, and will start trimming positions above 30-40% above current prices, in case the market realises the value residing in the security without any activist intervention.

Clarpdf

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As many of you probably know, it has been a helluva week with some banger successful calls, and I think I’ve earned the right to take juuust a few victory laps on some of the trade recommendations. Here we go:

Victory laps:

August 5th: Short TZUP. 20% Profit

Thesis was: Celebrity investor filing to sell shares + trading at MASSSIVVEE premium to crypto holdings + did just 150 dollars in revenue in recent quarter

August 6th: Long GROW, Short JETS: 9.02% profit (hedging ratios explained in article taken into account)

Small cap company with huge net cash position buying back shares and having a fast growing ETF

August 6th: Long MKTW: 2% profit

Thesis was: Co. with nice growth prospects (not too good but better than street’s anticipations) with net cash position buying back shares

August 7th: Long GRVY: 10% profit

Thesis was: Topline growth in company + entrance of activist can unlock shareholder value

How I am playing the same trades listed above going forward (small tweaks in position sizing, hedging ratios, etc)

Well, so far, the trades have worked beautifully. However, there have been some commentary I have been meaning to give out regarding the trades I’ve shared with the paid subscribers.

Above is the graph of MKTW. We have hit a short term resistance, so I would suggest taking some risk off, and adding more at the support level which has held far better than I expected, at about 18.2$ ish

GROW recently had a breakout after our report but is heading a little lower to test the resistance it broke out of, and I think that would be a good place to add some more, which is at about 2.45$ ish

As for the JETS short that I recommended as a hedge to GROW (beta hedged with a slight overshoot, where I recommended for every 10,000$ long you are of GROW, go short 1500$), I think it might be time to boost the JETS shorts by just a little bit. For instance:

We are approaching (or have already approached) a resistance and I think some short term underperformance in JETS can be captured quite nicely by boosting our short hedges in the name

GRVY is doing great so far and I expect it to do great in the future. However it is a little bit of a sleepy name so don’t be surprised if there is some short term volatility. I think it’ll come back down to 65$ at some point to retest the resistance levels, where I’ll be gobbling up shares like a hungry pig.

Coming soon

• A rebuttal to Financial Time’s piece about AI making investment managers obsolete in future, by studying past pod behaviour and risk mitigating tactics and coupling with how position crowding in AI based Portfolio managers may create short term opportunities

• How to short meme stocks while insulating your portfolio to complete implosion. Is there a risk management based edge ?

• A compelling long trade

• A compelling short trade

Today, we will be mainly talking about two tickers: Both are Asian Video Game makers which I expect have clear catalysts ahead for outperformance, with a little bit of governance risk which I believe can be hedged away pretty easily.

To all new subscribers,

We are Ragnarok Research, a group of 17 year old investment analysts from Copenhagen, Denmark, doing due diligence into stocks and trying to provide actionable trade ideas. This post about 2 Asian Tickers is a huge event for us: As it’s an opportunity to learn a lot by assimilation as it’s our first post about Asian equities! Let’s dig in.

Why this opportunity exists with GRVY(main holding):

The two companies we are presenting to you today are Gravity Co. Limited(GRVY), and Gungho Entertaintment(TYO: 3765):

Now as you can see above, the share price of GRVY has severely underperformed. It had a rally in 2021, followed by a breakdown and now it’s in a slump. Why is this the case ? It’s a Korean Video Game maker trading at about 7X pe with 390 million dollars of cash, flexing a market cap of 440 million dollars with zero debt.

So, what’s going on ? The reasons are quite simple:

• There has been no meaningful growth in revenues lately. Sure it’s not exactly in a steep decline, but the market doesn’t see any avenues for jumps in revenues or net income

• GRVY’s majority owners, Gungho Entertainment are in all intents and purposes, bad operators. They refuse to let GRVY return any cash to shareholders! For instance, look at the share count of GRVY:

  

  
  Constant throughout

It’s funny, because GRVY is not exactly a bad business or anything. It’s just, the owners, Gungho, aren’t doing right by shareholders and this has taken a toll on the stock price.

Why this opportunity exists with Gungho(governance hedge):

It is a little easier to see why Gungho’s shares are trading low:

It’s currently trading at a market cap of 160B Yen, with 104B Yen in cash accompanied with 0.7B Yen in Debt, and is now trading at a valuation of 20x PE. Not terrible isn’t it ?

The problem with Gungho is it’s quite literally a one hit wonder. It’s main game, called Puzzles and Dragons, was released a whopping 13 years ago, and Gungho’s present revenues seem to be just milking this one game. I mean, why would they do anything else ? They have enough cash to survive for atleast a decade without doing anything, so why would they waste time coming up with an actual good game ?

There lies the problem. Gungho’s inaction comes in expense of the shareholders with years and years of chronic underperformance.

It’s time for change, and shareholders are infuriated

My core thesis: One of the best Japanese players Strategic Value capital has stepped in to revitalise Gungho. Investors are underappreciating that one of the avenues to do this, might be the revitalisation of GRVY.

GRVY is vastly different from Gungho. Gravity has monetised its ‘Ragnarok’ Game series (haha coincidence??!!) in a very effective manner, and has produced a lot of variations of the Ragnarok game for both mobile and PC over the years. GRVY recently released the game Ragnarok Crush, and a few other games and it seems to be a bang!

A few online mobile ad data have estimated that GRVY’s recent games have started to add huge amounts of topline growth due to popularity in Asia:

Source

The surprising part is that the GRVY’s NASDAQ listed shares haven’t properly reacted, partly to what I think is a lack of news flow. Moreover, growth in some of the games GRVY has released has led it to be highly ranked in some of GRVY’s main revenue generating demographics:

Amazing, isn’t it!

Okay, Ragnarok. We hear you regarding GRVY. But what about Gungho ? What’s the point of going long Gungho?

Glad you asked!

Now, strategic capital are some hardcore activists. After they built a stake in Daidoh, they helped triple the shares since 2022! Most US investors in GRVY, in our opinion, don’t put enough effort into due diligence to actually go to Gungho’s news flow and navigate all the Japanese sites. However, that’s what we’re willing to do!

In a newspaper ad Stratgic posted, here is what they had to say about Gungho:

Reading between the lines, here is what I gather form Strategic capital: Their claim about sharheolder return policy signals to me either buybacks or dividends. Increasing CEO renumeration signals to me that they want to out the CEO and are interested in crafting a compensation scheme that incentivises operational efficiency and more emphasis towards game developing and less milking the same game over and over again.

Strategic is outraged that there they have so much cash that they could survive for a while without doing anything. Therefore, they want to put the cash to good use in my opinion: shareholder returns!

Take a look at this document:

They want to increase the dividend so Gungho shareholders are better rewarded, and change incentive programs so that management is actually monetarily forced to do their jobs.

Now, notice how I called GRVY my ‘main holding’ and Gungho my ‘Governance Hedge’ ? There’s a reason for it.

Let’s take a look at a few scenarios that may unfold:

• Strategic Value cap loses(Highly unlikely since shareholders actually support their proposals ):

  In this scenario, our majority long holding in GRVY would pay off just a little bit because GRVY’s income statement growth has got me feeling really confident due to their hit game lunch recently

• Strategic value cap wins(Highly likely):

  Okay let’s go through this scenario. There’s a reason Gungho’s website has Gravity’s ragnarok series in the front page:

  

  GRVY is much more important to Gungho than shareholders might think. GRVY made about 360 million dollars in 2024, while Gungho made about 700 million dollars in the same period. All in all, if strategic value does get ahold of control of Gungho, I have no doubt that they will focus on GRVY in one way or the other. I see three scenarios here:
  
  - Scenario #1: Gungho (or rather strategic cap) milks GRVY for its cash reserves via a huge dividend from GRVY to Gungho and uses this cash for Gungho’s operations or to return this cash for Gungho’s shareholders(unlikely, and a little bit of a sinister view)

  I strongly do not believe this would happen, but if it does, I think this would benefit our minority Gungho long position because under Strategic Cap, who are veterans of capital allocation, I’d think this cash is put to good use where it’s either returned to shareholders, or it’s sparsely used for operations and game development
  
  - Scenario #2: There has been a trend in Japanese companies unwinding cross shareholding and using this cash to return value to shareholders(Sort of likely):

  If Gungho sells its GRVY shares, it’d no longer be the majority owner, and there would be atleast a little scope for better capital allocation. Refer to cluseau's article here. Japan is actually incentivising companies to unwind these cross shareholdings and do something with the excess cash, and Strategic value might actually see the appeal in this! This would mean new, better owners, or better yet, hungrier shareholders craving for better capital allocation! This would mean both our longs would probably make money!
  
  - Scenario #3: Strategic Value Capital makes Gungho pass a resolution to instruct GRVY to buy back their shares(Sorta likely as well)
  This might be the cleanest thing that can happen to GRVY shareholders. If Gungho, or Strategic notice that a big part of Gungho’s balance sheet is obviously at a depressed valuation and this can be changed (and remember Strategic is alll for capital return to shareholders), I don’t see why Gungho would look over the possibility of making GRVY do some buybacks!
  

  A reflection of how going long Gungho and GRVY hedges out some of the governance risks associated

  Folks, to be clear, my main long is GRVY. Out of the three scenarios highlighted above, I see only one scenario where it’s absolutely sure that GRVY will have some short term headwinds, due to it’s cash being dividend-ed out to Gungho. However, this cash that Gungho would have after that operation would somehow be used for the better, assuming Gungho is under the control of Strategic Capital. So, the ‘Governance’ risk of Strategic cap absolutely miking GRVY’s cash reserves and leaving it out for dead(highly highly unlikely that this will happen) is atleast partly hedged out somehow.

Now, onto some of my holdings:

LONG GROW, SHORT JETS

I haven’t released a proper full length write…

Read more

The important of having an investment philosophy is cannot be understated.

When I just first started out with investing, I was all over the place. I mean, my entire due diligence process before I invested into any company was just a quick google search of what they do, and another google search of whether that particular industry is expending. Simple, eh?

Well, that did not work very well for my portfolio

One of my favourite cautionary tales of all time, is when I bought two stocks back-to-back: SONM, and MSW.

I bought SONM after about 2 minutes of due diligence: Someone had given a takeout offer at a huge premium, and the the stock wasn’t trading close to it. Thus, I bought. NO more due diligence there. I then bought MSW because … well… bitcoin treasury was announced. Here is what happened

Those two trades made me lose a thousand Danish kroner from my portfolio… while my portfolio value as a whole was about 8,000 Danish kroner. Double digit % loss!

And this certainly wasn’t the only time. I would read a twitter thread somewhere, get hyped, and go out and buy without doing a shred of due diligence about the stock.

Value investing ?? What’s that ? I’d rather buy near-bankrupt Chinese scams which just announced a bitcoin treasury!

I think these two trades were the catalyst in really formulating a process investment protocol to follow. Watching my portfolio bleed money every single day was painful as heck, and by studying a few successful trades both online and in my own portfolio in the past(but alas, these were sized in a very small allocation) and finally somehow pulled off a semi-turnaround, growing my account size by about 30% since April:

Sure, SPY is up double digits since April too, and it can be argued that it is levered beta, but still a vast improvement from the depressing double digit % loss from the months prior. All the ‘success‘ in the portfolio after the month of April, in my opinion, is setting some good rules and ‘frameworks’ to follow, if it makes sense.

My Framework-lens based approach

The way I view investing, is that it’s an art. It’s subjective. In fact that’s why the markets are not efficient giving us exploitable opportunities. But when I say ‘frameworks’, I mean it in a way that I like to put on different lenses when I look at different companies.

For example, take Transmedics Inc (TMDX):

TMDX, at the time when the red arrow mark was drawn, was trading at a Price-To-Earnings ratio of about 40-60x. Price to FcF was at a similar range as well.

Now, would any strict value investor buy something trading at those valuations ? Most probably not, since they’re too used to companies trading at 2x PE or whatever.

However for a growth investor, that price was a dream. This thing was growing at double digit percentages and was trading at such a low price due to ONE disappointing quarter.

This is the crux of the way I view trading: Not every stock will appeal to every ‘lens’. Something that may be liked by a growth investor might be shunned by a value investor. My investment philosophy is to invest in a company where the combined appeal in the stock seen through one or more lenses is outrageous.

What does this mean? Here is how I’d better put it:

When TMDX was trading at about the 60s, the appeal in the ‘growth’ lens was immensely, outrageously high due to flight tracking showing that the disappointing Q3 earnings was just a blip, and growth was bigger than ever. However, the ‘cheapness’ lens’ appeal was little low-to-mid, with the PE and Price to FcF ratios being mid double digits (albeit they recently turned profitable so wouldn’t punish that too much). So, at a price of 60$ per share, the value in the ‘growth‘ lens was so high for me, that it was enough to counteract with the ‘meh‘ value in the cheapness lens. So, I bought!

Maybe this is a form of factor investing, I am not really sure. But the overall goal for me is to either find huge amounts of ‘value‘ in one lens (such as growth lens, cheapness lens, capital allocation lens, etc) enough to compensate for the sort of ‘red flags’ that may arise from the other lenses(say a really high PE ratio, etc) OR find small fragments of value in different lenses and when they add up, they make a decent investment

The list of lenses I take into account while looking for value/appeal in a company

For those who don’t really get why I call them ‘lenses’, imagine this. When it’s hot, you wear shades. But when you’re in front of your screen, you probably wear blue-light glasses. Point is, you change what lens you wear depending on what’s front of you.

Similarly, I try to look at companies in different perspectives. Is this a grower ? Is it a company in the stage of returning capital ?

- The Capital allocation lens. I call it the ‘forgotten child playbook‘. TLDR; ‘Balance Sheet Value‘

Terribly sorry if the mini-title spurs up some childhood trauma you guys might be harbouring, but I call this the forgotten child playbook, because my favourite type of companies to look at, are castaways. Maybe they screwed up a little before, and the market punished them to Kingdom Come, and now trade at absurdly cheap valuations.

However, that’s not all. A shit ton of companies fit that category. What I like to see, is that the company clearly trading at a discount to fair value, and the management team closing that valuation gap via buybacks/dividends, etc. I simply love cases like this and these are my favourite type of trades. I know the mini-title says ‘Balance Sheet Value’, but in reality it should be ‘Balance Sheet Value being returned to shareholders’!

Now, it is important to me that these buybacks or value-generating moves are not ill-timed. For example, take a look at INMD:

Management repurchased a boatload of shares… but the only thing that was faster at reduction than the share count, was the share price (boom). I know a lot of people have different reasons, such as INMD’s growth prospects becoming grimmer by the day, but INMD executed these buybacks at a time when INMD’s balance sheet contained 720 million dollars in cash, and about 110 million dollars in liabilities. ‘Net cash‘ works out to be about 610 million dollars.

The market cap was about 1.5 billion dollars.

See what I mean ? Why would buybacks work in this scenario when:

• Prospects of income statement growth are deteriorating

• The company trades at a 2x premium to net cash ?

If INMD was trading about, say 60% lower, that would be no-brainer level of buying price, because this is where buybacks can help the most.

An example of where buybacks went right is MOMO. (Shoutout Cluseau for the trade idea. Link here)

Notice where I have drawn the arrows ? At the times when the base of the arrow starts, these were the stats of MOMO:

1. Arrow one: Market cap was 850 million dollars. 1.5 Billion cash, 700 million liabilities. Net cash: 800 million dollars

2. Arrow two: Market cap was 880 million dollars. 1.2 Billion cash, 750 million liabilities: Net cash: 450 million dollars

Do you see the vision ? When net cash balance is a huge % of market cap AND Buybacks are happening, magic can take place :) Of course, timing is much, much harder than I made it seem, but the overall summary is that I like buybacks, only when they are executed while closing a valuation gap, not when the stock is trading at an absurd premium to its balance sheet. Of course, this ‘capital allocation’ lens is not the only component in making an investment decision, but for me it is a major part!

How do I decide when the value proposition of the ‘forgotten child’ element is not high enough? Easy! Just track net cash value relative to market cap!

Now suppose you bought a stock, such as MOMO and you are happy with it. Hypothetically, let’s say at the time you bought it, Market cap was 850 million dollars. 1.5 Billion cash, 700 million liabilities. Net cash: 800 million dollars. However, what happens when the stock actually starts rising ?

The same way I like to rate the ‘value’ propositions form each of my lenses before deciding whether to invest, I like do this every week or so for my holdings. For example(hypothetical figures):

Week 1: MOMO market cap is 6% premium to net cash. Balance sheet value: 9/10 Week 2: MOMO market cap is 10% premium to net cash: Balance sheet value: 8.6/10
Week 3: MOMO market cap is 20% premium to net cash: Balance sheet value: 6/10

See what I mean ? The more and more the company’s balance sheet value deteriorates(net cash as % of market cap), the risk to reward from a forgotten child-esque lens decreases, and so does my portfolio allocation of MOMO along with this score(well, I change my portfolio allocation using an overall figure with all the lenses added, not just the capital allocation lens)

- ‘The income statement value’ lens. I do not have a clever tagline for this framework unfortunately. TLDR; ‘Can the company grow its revenues and net income better than market expectations ?‘

Now let’s remove our capital allocation glasses, and put on our growth glasses. I think this is the framework most of us grew up with. ‘Buy cheap companies with low PE ratios’. Bleh. What fun is that ? I think that is actually the best way to underperform since you’d probably end up buying value traps(unless company is trading at a balance sheet discount and is repurchasing shares lol)

My personal definition of income statement value is to see whether the realised revenue growth in a company can be more than what the market is expecting. I attempt to gauge market expectations by looking what sell-side investment banks say, and what fintwit or just the investment community in general says, paired with the usual PE and PS ratios. The two internal devices I absolutely love using under the income statement value lens are:

1. Information arbitrage(insider tradi- I mean, doing more due diligence than the other guy)

2. Time arbitrage(Just being patient … aka not look at my portfolio because I don’t like the color red)

I still think that my finest information arbitrage till date was TMDX by tracking the flights that they did and coming to the conclusion that growth had NOT stopped. My writeup can be read here. Sure, the thing was not objectively cheap, but when I bought TMDX, it was trading at a price-to-sales ratio of about 5x. That number is very cheap for a company which I thought would grow mid-to-high double digit percentage. This is the essence of income statement value investing. Investment banks all over were screeching about growth stalling and Fintwit was a mess. But all you had to do, was look at the data :), and you’d see that the relatively-low PS ratio was a testament of the market undervaluing TMDX!

Now Time arbitrage requires some balls. It’s basically just being patient, and hoping that a company’s current situation slightly improves going forward. I see this in a lot of retail names. Look at GAP for example:

GAP fell from about 35 dollars pre-covid era, to about just 5 dollars during covid. In retrospect, sure it was an easy enough decision to buy consumer names. However the essence of income statement value lens, is constantly asking yourself ‘What does the market think will happen to future revenues, and is that what I think will actually happen ?’

For context, this was how the revenues looked:

The market saw GAP’s low revenues in 2020 and decided to linearly forecast it into the future as if the trend would continue. However, it didn’t :)

The market always, in my personal opinion, tends to extrapolate shitty situations into the future, and it is the investor’s job to look at what the market is signalling about the future, and then make a decision.

One of my favourite subsets of income statement value investing in derivatives of megatrend, and I think the market for a good while awards opportunistic investors with companies priced for ‘meh‘ growth, but will capitalise hugely. Here’s an example:

The big latest megatrend: Artificial Intelligence.

What were the obvious trades ? Well, MSFT, Nvidia obviously. So this is the first derivative. But what about the second derivative ? In my opinion, this can be found by following the money. The hyperscalers were pouring huge amounts of capex into data centers. So, PSIX was a pick:

Now, similar to the forgotten-child-lens playbook, I constantly try revising my ‘income statement value’ rating whenever the stock’s fundamentals or the stock’s price change in a material way. A 6x PE stock which I forecast will grow 10% does not deserve the same allocation if it becomes a 20x PE stock forecasted 10% growth. Point is MY quantification of income statement value is a marriage between my forward looking analysis, and the present day perception

When do I pull the buy-trigger ?

They say technical analysis is astrology for men. And I agree. But unfortunately, the cases where I have ignored technicals has cost me dearly. I know your usual trading guru would talk about the ‘Dinosaur tail cup and handle‘ pattern, but I prefer to be a little simpler. Here is all I pay attention to:

• Key moving averages on the daily, weekly, and monthly charts (20, 50, 100, 200)

• Support and Resistances.

I try to overlay my fundamental approach with technical analysis without fail. I would never buy a name without it being both technically and fundamentally sound. I don’t exactly believe that the secret to outperformance is hidden in the charts themselves, but I think price is the most powerful signal of all, and I always want to follow the money.

Now, I employ different types of technical analysis to different types of investment theses, with most of these theories inspired by James Bulltard. For instance, when I want to take a fairly contrarian position, like how I did in TMDX, I feel comfortable with confirmation in the monthly and/or the weekly charts. And that is what I had:

On the weekly chart, TMDX was grazing beautifully over the 200 SMA curve. For contrarian positions, I make it a point to buy (provided I have strong fundamental conviction) when the price is on either the 20, 50, 100, or 200 Moving averages, on either of the timeframes (daily, weekly, or monthly. I like weekly and monthly best).

Now look at the monthly chart of UNH:

We all know about the shitshow going on at UNH. But the last time it grazed the 200 month moving average was back in 2008, a terrible year for everyone, the stock obeyed the 200 monthly moving average as a beautiful support level, and that is what I suspect will happen now. I don’t have fundamental conviction on UNH yet because I haven’t dug deep into it, so I wouldn’t buy it yet.

For slightly more ‘laid-back’ positions, as in where the stock is already going up but I think it has more room to go up, I like to buy on temporary weaknesses. Look at MKTW for example:

I like the stock due to the fact that I think it is turning around successfully. But besides that, now would be a great time to buy (I sized here very recently) because the price is touching the 50-day moving average and also is at a support level in the channel that I have drawn. However, the moment the stock starts breaking down below the moving averages, I would either slash my position by a big %, or sell all my holdings temporarily. Now, moving on to one of my favourite technical cases to analyse: PYPL

I think that this is a great showcase of how in an ideal world, I would want to manage risk. First off, when PYPL was at all time highs, it started to have a breakdown. Notice how it didn’t really bounce off of any of the key moving averages. The moment something breaks below a moving average, I would de-risk that position because in the moment, I would have lost any technical conviction I might have had. And besides, PYPL was trading at 60x PE… Yeugh.

Another instance of ta good trend-based technical position is the following,, ticker:VRT:

Massive support level, and price blistering through the 20 and 50 day moving averages was a great thing to watch.

Either way, notice the deadly downtrend marked by the white channels(back to PYPL again) ? If I for whatever reason were to have fundamental conviction on the name, I’d buy whenever the stock reaches the support level. This way, in hindsight, I may have made some money even! However the real meatish play, is the mini turnaround. The way I like to trade stocks emerging from multi-year lows is to buy when a golden cross occurs, that is, the 20 day moving average crossing the 50 day moving average:

Notice how when the price and also the 20 day moving average went above the 50 day moving average, we had a mini rally? That is what I aim to capture in names like PYPL(Given I have enough conviction in fundamental growth)

But again, notice how the price then breaks down after the mini-rally ? Now depending on how risk-averse I feel, what I feel like I would do is try to size up in each of the moving averages, but immediately cut my positions when the price crosses below the moving averages, because a break in trend of any kind (be in moving average, or a trendline), is an immediate no for me. I am always happy to give up small bits and pieces of gains to wait for technical confirmation, since that is where my risk management technique lies. The moment something closes below the key moving averages on either of the timeframes, I take time to re evaluate the fundamental thesis, and decide how much of the position I want to slash.

If I have decided to buy a stock for a short term position, it dipping below the 20 day moving average is a warning sign for me that something is breaking down, and it is a reminder for me to re evaluate the fundamental thesis again. However, if technicals improve, always get back into the position if the fundamentals still are good! One of my worst trades is EVLV:

The stock well from 4$ a share to about 2.5$ a share in a few days due to fraud allegations. But even if they were true, only a small % of revenues were ‘fake‘. So, I bought some. However, I set such a tight stop loss (about 10%), that I got stopped out, and discarded it from my watchlist. But notice how the name rallied above the 20 day moving average, and then increased about 100% from that point ? Yeah…. pain. Thats why I have always made a point to never discard names from watchlists … and this was especially painful because fundamentals were still sound!

Now, don’t get me wrong, If the fundamental thesis has been getting stronger and for whatever reason the market is still punishing the stock, I would wait until it kisses the 200 Simple moving averages to size up. However, the moment it crosses that on the weekly or monthly timeframe, I’m completely out.

Morphing my investment philosophy to your needs

Now, it is very possible that my so-called investment philosophy has got you nodding your head and get you thinking ‘This kid’s account is not surviving for more than a year’. And quite frankly, I wouldn’t be too surprised if it didn’t :)

But what I’m hoping to impart is my mental model. For me, I like to divide fundamental value into looking at a company with the capital allocator’s lens, and then the income statement value lens. Maybe that’s not what you pay attention to, but maybe you have something else!

I know a ton of investors who prefer companies re-investing profits back into the company instead of buybacks. I also know a ton of investors who like the thrill of buying pre-revenue companies. Well, take the factors that matter to you and try making a blend of your own ‘value‘ metric, and use that as a gauge of how much of the portfolio you want to allocate to a position, if at all!

One example of a custom lens-based framework would be a metric blending growth in gross margin (maybe you like companies becoming more cost-efficient), and reinvestments into the business ? It can be whatever you want! Point is, I heavily think that it is good to keep evaluating the ‘value‘ proposition in the stuff you care about, and trimming or increasing positions as this value changes as the price increases.

Tying it all together: A barebones analysis of EXFY, Expensify Inc, where I look at the company from both the income statement lens and capital allocation lens

1. EXFY: Expensify Inc

Expensify Inc became popular this year because it was the title sponsor of the fictional F1 team Apex GP in the movie ‘Formula 1’ starring Brad Pitt.

1. Now, let’s look at EXFY in the lens of capital allocators or Forgotten children(lol):

   

   • Market cap: 180 Million Dollars

   • Share price: 1.98$ a share

   • Effective ‘Net‘ Cash: 50 Million Dollars

   • Share count: Increasing (bad):

     

     
     

   • Buyback status: 3 million dollars repurchased at a price of 2.33$ per share(part of ongoing 50 million dollar buyback authorisation):

     

So, all in all, we have a pretty clean balance sheet … but shareholders are being diluted. But then again, seems like the company wants to mitigate this by buying back the shares, and now we have a chance to buy it at a price lower than the previous price at which management bought 3 million dollars worth of shares!

However the increasing share count ruins it for me. Balance sheet value: 6/10

Now, the income statement value:

I mean, it’s pretty flat, right ? Nothing special here. Although I think that there is a huge potential for improvement. So far, a scroll through reddit shows the following reviews about Expensify’s service:

The worst part is I see a revenue cliff coming soon maybe:

I see a lot of people who subscribed for a 12 month subscription coming off of their plans because EXFY does not allow cancellations of any kind:

Now I know that every service will have customers that don’t like it but … meh the the magnitude of shitty reviews everywhere was abysmal. I asked someone in the industry and this is what I got:

Income statement value: 4/10. I don’t know maybe an activist can improve it and maybe the F1 movie gave it a little bit of a marketing boost but I don’t like the long term prospects

Verdict: 4/10 Income statement value + 6/10 Balance sheet value = 5/10 average.

My verdict is to put this bad boy on my watchlist, and wait until one of the value mines , be it income statement value or the balance sheet value, improves materially. For instance, if the company stops the bullshit dilution, I would bump up by forgotten-child-playbook rating from 5/10 to about 6/10, and if they either push harder on the buybacks (they technically should, since current price is lower than previous buyback avg price) or the price collapses by 50% somehow, I would hike my rating from 6/10 to about 8/10 in the capital allocation lens of the company!

Moreover, the technical chart of EXFY is not pretty at all:

We are at 1.98$ per share now, and given that we broke an important support level, I wouldn’t be surprised if we reached 1.6$ a share. Then, depending on how the fundamental thesis is going (maybe the shitty reviews stop) Id scoop up shares at around 1.3$-1.6$… Unless it explodes higher and goes above the moving averages with improving fundamentals.

Ragnarok Research’s latest actionable idea

Taking every explained above into account, here is a small company that has picked my interest. This name is actively repurchasing shares, small enough to not be on anyone’s radar, in a great technical position, and I think that there is scope for income statement growth.

Ticker: GROW; US. Global Investors Inc.,

Now, why am I interested in this name ? Let’s put on our forgotten-child investing lenses:

Forgotten child investing lens:

• Market cap: 31 Million dollars

• Cash: 27.3 Million dollars

• Total Liabilities: 2.6 Million dollars

• Effective net cash = 24.7 Million dollars

A company that has almost 25 million dollars in cash against a market cap of 31 million dollars is awesome when seen through my balance sheet value lens! And moreover, the company seems to be returning capital as well through buybacks:

Moreover, in this piece put out by GROW themselves, is outlined clearly how committed GROW is in servicing its shareholders, and how there has been a buyback program since as early as 2012 and has been renewed each year:

From a balance sheet value perspective, I think now is a great time to buy, because it is the first time in frankly a long time that the net cash position is a huge percentage of the balance sheet, and it is only now that any buyback efforts will start to yield fruit in my opinion, since there is actually a valuation gap left to be closed.

FORGOTTEN CHILD LENS VERDICT: 8/10. It could have been higher if the net cash position was more than the market cap, but I’m not gonna complain! This is a company committed to returning capital to shareholders

Income statement value lens:

Now that we have taken off our capital allocation /balance sheet value shares and put on our income statement value lens, let’s see how revenue and net income is trending:

Not looking good

Now, US Global investors is basically an investment manager that runs a bunch of ETFs, and according to its 2024 10-K of the period ended June 2024, the largest ETF in terms of AUM that GROW managed was ‘JETS’:

Roughly around 80% of the company’s assets are tied up at JETS. Now, JETS’ investments are mainly airline stocks, airport operators, and things of that nature:

Now I don’t consider myself a macro investor by any means whatsoever (I’m not as cool as James Fishback), but I am looking for anything that can give me color on the future of GROW’s net income, and when someone mentions a capital intensive business such as airlines or anything of that nature, the macro backdrop is very important to consider. So the top 10 holdings constituting 60% of the ETF are the following:

Now we all know what’s happening with Trump and Powwow, and the whole labour numbers ordeal that unfolded last week. Now I have seen a flurry of FT articles looking like the following:

If Powwow does lower rates, I would think capital intensive businesses such as airlines will benefit from this and the shares would rise in a meaningful way atleast in the short term, hopefully giving some meaningful fees to GROW. Nevertheless though, the JETS ETF has been doing pretty well since the broad-market Jan-April selloff, being up about 30%:

This selloff is what we think is the main cause of disappointing revenues for GROWW, due to less fees and more outflows registered by GROW. However, we expect a slightly better quarter ending June, since it’s practically been a rally. Moreover, a drop in interest rates according to me would spur a mini-rally in names that JETS holds such as DAL, UAL, etc, giving GROW some extra bread:

One risk of course is, is higher rates = higher fuel prices = less net income for arlines resulting in falling stock prices. I however am sort of hoping for the following two things:

1. Travel demand increases enough to compensate for rising net income due to potential oil price rise

2. Political climate cooling so oil prices don’t shoot up toooo high.

Nevertheless, I think the airline industry might be in decent shape, considering more people are searching for flight bookings now, than in the past 5 years in the States:

VERDICT for income statement value lens: I think that the near term future outlook of GROW is a 7/10 due to recent performance of the JETS ETF being pretty good, and owing to my prediction that a drop in rates will help airline stocks a good amount, and amid the industry supply inflection mentioned in the ft article above (dunno if its true but just the macro interest rates thesis can enable me to sleep well at night)

Technical Analysis:

On the daily chart, here is what GROW looks like:

As you can see, GROW broke out of the downtrend that it was trapped in for a long time, and now is experiencing a small pullback back to the support levels and moving averages:

Notice how the price fell back to the red line (200 day mving average) and ended the green with a green candle … on a day that SPY was down almost 2%! This levels acts as a strong support level, and I have started a small position here. And by small, I mean about 1% of my portfolio, nothing much. I do however want to size up by a lot. I have decided to increase my stake when the price crosses the 50 day moving average and ride the wave until it hits 3$ a share, where I would want to trim my position, since the balance sheet value would be a little lower with the increased market cap compared to the net cash position.

However, if the price falls from here, I wouldn’t mind (it’s just 1% of the portfolio after all) and it would actually be a good thing since the balance sheet value would be increasing (well, if the reason for the decline isn’t broad market movements, and it is something that can shatter the income statement value, then it’s bad of course), and I will be eager to pick up shares even below when I start to see some technical inflection.

On the weekly chart, here is how it looks:

Obviously I am not too pleased with the price breaking through the 100 -week moving average, but the 20-week moving average is just 3% below the current price, and if it reaches there, I will try to size in there just a tiny bit, and if there is a meaningful technical inflection, I’ll average up!

We present to you, $MKTW:

MarketWise is an owner of a few companies that publish in-depth research and due diligence primarily for retail investors. Here are the companies it owns:

Even though we are bullish on the stock, we empathise with the market for punishing the name this long. For instance, revenue growth has been negative for the past few quarters:

However, while the revenue growth has been extremely abysmal, we think that the market has punished the stock too hard, and continues to not appreciate its recent progress at a turnaround and growth. For context, MKTW did 83 million dollars in revenue this quarter. By annualising this, you get a Price-To-Sales ratio of just 0.96x, and a PE of about 4.9x

Nevertheless, we aren’t ones to buy a stock just because it is cheap. Here is why we see tremendous turnaround potential in MKTW’s share price:

We think the worst is behind us. Net billings are up in recent quarter, and search volume for MKTW companies have been exploding lately. The market thinks something terrible has happened to revenues; but we think MKTW’s core business is resilient

One of the main reasons MKTW revenue and KPIs have been suffering is due to them shutting down a relatively big part of their business called ‘Legacy Research’. This gradual wind-down kicked off in mid 2024, and the stock has reacted rather badly to this:

This wind-down of Legacy Research resulted in a rather ugly decrease in Billings in 2024, which puts a lot of the share price action in 2024 in context:

For clarification, total 2024 billings was 240 million dollars

Now while it is true that it did hurt business a little, we think the market taking the stock from about 60 dollars to about 20 dollars is a little bit of an over-reaction, as the market was trying to value MKTW as a company which was losing revenue due to Legacy Research.

However, the most recent Q1 2025 Earnings showed a few things:

Total billings are up both Quarter-over-Quarter and Year-over-Year(by netting out the impact of Legacy Research). Therefore, we think that MarketWise deserves a re-rating in multiple, as it continues to show that the core business is solid, even without Legacy Research.

Moreover, what investors think is an organic decline in revenue and subscriber counts, seems to us as just an effect of the winding-down of Legacy Research, with the core business still going strong. For example:

While investors might be spooked by reading that little passage, here is our takeaway: The only users that are leaving, are the low quality, low ARPU ones.

This is also evident in the fact that quarter-over-quarter ARPU has gone UP while subscriber numbers have gone down. This signals to us that the current customer churn is that of the low-quality Legacy Research users:

Sure. Some subscribers are leaving, and this might be a negative for a business. But to punish it by rerating it to a 0.96x price-to-sales, and a 4.9x price-to-earnings is just absurd to us, and we think this is a product of the market over-estimating core-business churn and confusing it with low-quality Legacy Research users. Essentially, the company went from being priced to perfection, to being priced to achieve nothing!

Now that the winding down of Legacy Research is mostly completed, we think that MKTW deserves a fresh start by the market as a 4.9x PE company with a healthy balance sheet with potential to grow. The market punished the company by taking it to 60$ a share to about 20$ because of the loss of Legacy Research, but we think that this loss is more than priced in, and the market is overestimating the value of Legacy Research that MKTW lost. Now, it is undervalued with lots of potential to grow. In order to put into context how much potential it has, we analysed web traffic data and deduced that the 2 biggest companies MKTW owns are Stansberry and Brownstone Research. Here is how the data looks for the main companies MKTW owns:

Stansberry Research:

A recent jump in organic traffic to Stansberry research

We think a large part of this is due to former NYC mayor candidate and investor Whitney Tilson being an editor at Stansberry:

Moreover, Google trends data shows heightened search activity in Q2 2025:

As can be seen above, the higher relative interest points on the graph fall on dates within the Q2-Q3 2025 range. What we find further encouraging is the following:

50% Increases form the previous time period in relative search volumes for the login pages of Stansberry and the website itself!

Brownstone Research:

Organic Search traffic has risen about 100% since Feb 2025, with Google trends data showing something similarly encouraging:

As can be seen, high search volume relative to that seen in January 2025 has increased in frequency in the Q2-Q3 2025 range, and we think this growth is stable. The most encouraging statistic is what we display below:

Search volumes for the members url has been on a tear, but also the secure site of Brownstone. For context, secure.brownstone.research is the checkout site where users go to pay for their subscriptions!

Management has committed to improving shareholder returns by authorising a 50 million dollar buyback, and has proved that they have shareholder’s best interests in the past. This should help re-rate MKTW from a cheap 4.9x PE stock to a more accurate valuation

A casual look at the balance sheet reveals that net effective cash balance is around 37 million dollars:

79 million cash - 457 Million Total liabilities + 415 million Total deferred revenue = 37 million dollars net effective cash.

Now the company had 97 million dollars in cash in Q4 2024 but it reduced to 79 million due to some initiatives that management took to instil shareholder confidence. For instance, a 10c special dividend on top of a 20c regular dividend:

And even more impressively, a 50 million dollar buyback authorisation:

The best part is that management disclosed that they commenced repurchases in Q2 2025:

We think this is a great decision, because one of the few things that can bridge the valuation gap between a ‘value‘ company and a reasonably priced company is enhancement of shareholder value and improving capital allocation. So, when you take a healthy balance sheet enhancing shareholder return through buybacks along with growing billings and a potential for strong revenue and earnings, you get a buy opportunity!

Mild insider-buying by the CFO:

The insider buy by the CFO is just a 16k buy, but it isn’t nothing, and we thinkt hat him buying this amount in such an illiquid stock trading about 300k USD a day is a good enough vote of confidence to us

How we are playing this:

We plan on buying and selling at around 25-30$, depending on how the rest of the portfolio is doing. If the market has a bad reaction to earnings, we will study it and put out our own interpretation of the earnings and revise our outlook based on what is being reported, and close our position if our thesis is proven invalid in any way.

By reading any of our posts, you agree to do your own due diligence before making any investment decisions. You agree that the authors of this publication are in no way responsible for your investment decisions, and are not liable for any of your possible investment losses, and you also agree to acknowledge that we are do not guarantee any accuracy in our research. You agree to also not proceed with any legal action against us.

The authors of this publication do not give any buy or sell recommendations and do not ensure any correctness to our claims or findings. Under no circumstances would you hold the authors liable for any investment losses. One should assume that any sentence or statement in our posts can be inaccurate and factually incorrect and should not influence anyone’s investing.
Sincerely,
Ragnarok Research

Today we present to you AEI: Alset Inc. At first glance, the share price performance has been abysmal

AEI’s main business is real estate:

Now, a huge reason for the disappointing share price performance is due to AEI’s pivot into this real estate sector. Before AEI’s full pivot into its current business iteration, AEI served as a ‘solar home maker/installer‘ for none other than Tesla

This undoubtedly was one of the key reasons for the sky high prices of AEI back in 2021. However, for whatever reason, the deal either did not materialize or AEI pivoted away from this, which is one of the primary reasons for the share price drop, and we think shares haven’t recovered due to the illiquidity, and complicated structure in the company. However, in this nanocap valuation, we think AEI is a buy for the following very simple reasons:

AEI, with a market cap of 13 million, has about 20 million dollars in cash. Dissatisfied with where they are trading, the company has announced a 1 million dollar buyback using this cash.

At the most recent Q1 2025 financials, AEI had about 25 million dollars worth of cash:

And a total liability balance of 5 million dollars:

This gives a total net cash balance of about 20 million dollars, a hugely comfortable position for a company with a market cap of 13 million dollars.

However, we all hate cash squatting companies that don’t allocate any of that extra cash for the benefit of their shareholders, which might be one of the reasons the stock is trading so low! The company has not taken any steps to turn the balance sheet value into shareholder value. This was until we saw the following announcement by the company:

This buyback plan, if executed, would retire about 8% of the company’s shares by December 2025. Looks like the company finally got the memo! This is a company actively turning its potential balance sheet value into shareholder value! This is a huge part of why we are long.

Along with this cash, AEI owns about 132 single family residential properties as well, which while we don’t exactly see as ‘liquid’ investments, it still counts for something.

In the extremely unlikely scenario where the company enters a state where it needs to squabble for cash, it still owns about 132 Single Family properties:

Note that the place these homes are located is in Montgomery and Harris Counties, with the median house prices in this region increasing over the past 3 years:

In fact, in late 2024, AEI, through its subsidiary, sold some of its residential properties for 4 million dollars:

While this may not sound a lot, it signals to us that in addition to the copious amounts of cash the company has, some value exists in the residential homes it owns, and the company is committed to return some of this value to shareholders via buybacks!

AEI’s CEO bought a few shares earlier this year, which we love to see, since if management doesn’t believe in their own company, why would investors do so ?

We think insider buys from the CEO in a deep value nanocap shitco is one of the best indicators of outperformance, all things considered.

For everyone who checks insider transactions using Finviz, the following insider buy from just 2 weeks ago is not reported:

Moreover, Finviz actually shows these two huge insider sale bars by the CEO:

When in reality, these insider sales actually pertain to the CEO selling his shares in another public company with ticker IBO:

In addition to the insider buys reported on February 2025 in the screenshot above, insider sale trackers that I, and presumably other retail deep value investors follow don’t seem to reflect this huge insider buy made in April of 2025 either:

The company is so small and obscure and under-followed, that even automatic insider trading trackers have given up on it! We think the consistent buys from the CEO, in addition to the announced 1 million dollar buyback to drive value creation is all the signs that we need that value will be returned to shareholders, and that this deep value shitco could be a pretty good investment.

Conclusion

At the end of the day, ‘sophisticated‘ investors would shun the stock due to an unreliable income source and due to its narrational pivot away from Tesla. However, there is a tremendous amount of value to be found in the balance sheet, and we have initiated a position now knowing that management is committed to return this to value to shareholders. Sure. It is a nanocap shitco. However, that is what deep value investing is about, and we think that this name has more value to offer than the market perceives.

By reading any of our posts, you agree to do your own due diligence before making any investment decisions. You agree that the authors of this publication are in no way responsible for your investment decisions, and are not liable for any of your possible investment losses, and you also agree to acknowledge that we are do not guarantee any accuracy in our research. You agree to also not proceed with any legal action against us.

The authors of this publication do not give any buy or sell recommendations and do not ensure any correctness to our claims or findings. Under no circumstances would you hold the authors liable for any investment losses. One should assume that any sentence or statement in our posts can be inaccurate and factually incorrect and should not influence anyone’s investing.
Sincerely,
Ragnarok Research

NeuroOne Medical Technologies Corp. (NASDAQ: NMTC) is a micro-cap medtech innovator currently trading at sa compelling valuation, with a market cap of approximately $30 million. Specializing in minimally invasive diagnostic and therapeutic devices, NMTC focuses primarily on neurological disorders, especially epilepsy—a massive, underserved, and chronic market. Its flagship innovation, the OneRF Ablation System, is the only FDA-cleared sEEG-guided radiofrequency ablation (RF) platform, offering both diagnostic and therapeutic utility:

The stock is trading at depressed levels due to short-term headwinds: (1) a broad-market selloff on April 3rd linked to tariff concerns, and (2) a recent $7 million equity raise(on April 3rd). These events, while ostensibly negative, provide an asymmetric opportunity for investors willing to look through temporary volatility.

The OneRF system is a major part of NMTC’s portfolio, since it is the only FDA-cleared sEEG-RF system:

This is used to manage and handle epilepsy attacks better, and diagnose the actual origin of the attacks in the brain as well.

Needless to say it possesses remarkable technology with a big TAM, since epilepsy is one of the most common neurological-related diseases(About 3 million Americans at the moment!)

Why does this opportunity exist?

Despite the breakthrough nature of its technology, NMTC’s stock has come under significant pressure in recent weeks, creating what we view as an asymmetric opportunity. The recent decline was triggered by two primary catalysts. First, on April 3rd, macroeconomic fears surrounding tariff implementations led to a broad-based market selloff, impacting even companies with no international exposure:

Second, NMTC executed a $7 million equity raise, diluting existing shareholders. While the market reacted negatively to these events, a deeper dive reveals that neither has any bearing on NMTC’s long-term fundamentals.

Executive Summary:

• Zimmer Biomet signed an exclusive distribution deal for NMTC’s FDA-cleared OneRF Ablation System, paying $3M upfront with potential for $1M in milestones. Zimmer ‘picked’ NMTC’s product to market and distribute
  
  

• Product revenue tripled year-over-year, growing from $0.9M to $3.2M — before Zimmer’s commercial rollout began. Ask yourselves: what will be the impact after Zimmer clusters the platform with the portfolio?
  
  

• Recent capital raise and Zimmer payment extend NMTC’s cash runway through FY 2026, resolving prior liquidity concerns.
  
  

• No tariff exposure — all suppliers are U.S.-based, and NMTC has confirmed no overseas shipping activity.
  
  

• A Fox News segment spotlighted a patient going from 10 nightly seizures to zero using NMTC’s device — underscoring clinical impact and market potential.

• NMCT’s President, CEO, and CFO together have bought about 0.5% of NMCT’s market cap in the open market

• The market is poised to grow, giving NMCT a huge growth runway
  
  

• NMCT’s product has a first-mover advantage, and has other advantages over the products, bolstering our confidence in its growth potential

Theses:

The thesis boils down to the following points:

• NMTC’s device has been ‘picked’ by Zimmer Biomet. Zimmer, a reputable company, has bought the license to market and sell the OneRF ablation system, which should spur future growth.
  As stated in NMTC’s financial statement(Q1 2025):
  ‘On October 25, 2024, the Company entered into the Zimmer Amended and Restated Distribution Agreement (the “Amendment”) with Zimmer pursuant to which the Company granted Zimmer the exclusive right and license to distribute its OneRF Ablation System for an upfront payment of $3.0 million, with eligibility for an additional $1.0 million payment from Zimmer upon achievement of certain specified net sales milestones.’
  The strategic partnership with Zimmer Biomet, a $20 billion medtech co., also represents a critical vote of confidence in NMTC’s technology and its potential to scale. Under the revised agreement signed in October 2024, Zimmer received exclusive rights to distribute the OneRF System in exchange for the upfront cash and a potential additional milestone-based payment. Zimmer’s proven commercial infrastructure and global reach offer NMTC a far more efficient pathway to market than it could achieve independently.

• NMTC’s quarterly product revenue(revenue from selling products unrelated to Zimmer’s license revenue) has grown more than 3-fold from last year
  Now, separate to its agreement with Zimmer Biomet, NMTC’s products have been gaining increased traction externally. Here are the results from its most recent 10-Q:
  

  

  
  In terms of financial performance, NMTC is also showing signs of real traction. Excluding the Zimmer upfront revenue, organic product revenue for Q1 2025 exceeded $3.2 million, more than tripling from $0.9 million in the same quarter of the previous year. This surge in organic sales indicates increasing acceptance of NMTC’s devices within the neurology community and lays a strong foundation for Zimmer to build upon in future quarters.
  
  Thus, we ask readers to consider the following: The product revenue(total revenue - license upfront payment) jumped to 3.2 million from 0.97 million from the year prior. How much more growth is in store for NMCT after Zimmer fully integrates the OneRF system into its portfolio:

  

  
  

• NMTC, in the letter to shareholders, has revealed after the most recent capital raise and the upfront payments from zimmer for the ONeRF system license, it has secured enough capital for it to last through the end of FY 2026

According to the same shareholder letter above:

The capital raise, far from being a negative signal, has materially strengthened the company’s balance sheet. Along with a $3 million upfront payment from Zimmer Biomet—its newly signed exclusive distributor—NMTC now has sufficient liquidity to operate through the end of fiscal year 2026. This marks a significant improvement from earlier financial statements that questioned whether NMTC could sustain operations beyond April 2025:

Source

• There will be no tariff impact to NMTC whatsoever:
  In fact, NMTC has no overseas supply chain exposure whatsoever—all key components and manufacturing are sourced domestically within the U.S., a fact explicitly confirmed in a letter to shareholders, NMTC clarified to investors that they have no tariff exposure whatsoever, since all their suppliers are housed in the United States. All of they key components are sourced and manufactured in the US:

  

  
  

• NMTC’s success story has been featured on Fox news, detailing the story of a girl who went from 10 nightly seizures to 0, with the help of NMTC’s device

Just about 10 days ago, NMTC’s OneRF ablation device was featured in Fox news due to it helping a teenager go from ‘10 nightly seizures to 0’:

The best part is the patient is now completely seizure-free:

Further underscoring the clinical potential of NMTC’s product is the public attention it has garnered. Just over a week ago, a Fox News segment detailed the story of a teenage girl who experienced a dramatic reduction in seizure frequency—from ten nightly episodes to none—after being treated with the OneRF system. This story, while anecdotal, provides compelling human validation of the device’s effectiveness and reinforces its unique position in the therapeutic landscape. NMTC is not just developing technology—it is changing lives, and stories like this one will likely help raise awareness and adoption over time.

• NMCT’s President, CEO, and CFO together have bought about 0.5% of NMCT’s market cap in the open market:
  In a strong vote of confidence, NeuroOne Medical Technologies' President, CEO, and CFO have collectively purchased approximately 0.5% of the company’s total market capitalization in the open market just about 2-3 weeks ago:

  

  
  Insider buying at this scale—particularly from top executive leadership—sends a powerful signal to investors. It reflects management’s conviction in the company’s long-term prospects and their belief that the current share price significantly undervalues NMTC’s true potential. This alignment of interests between executives and shareholders is especially meaningful for a micro-cap company, where leadership plays a critical role in execution, capital allocation, and investor trust. Such open-market purchases serve as a tangible indicator that those closest to the company’s operations view the recent selloff as a mispricing, not a reflection of deteriorating fundamentals.

.

Market Analysis of Epilepsy

According to a 2024 report by GlobeNewswire (Custom Market Insights), the global epilepsy treatment devices market was valued at approximately USD 526.8 million in 2023 and is projected to reach USD 548.4 million in 2024. By 2033, it is expected to grow to around USD 787.3 million, representing a compound annual growth rate (CAGR) of 4.1% from 2024 to 2033. Key drivers of this growth include advancements in neurostimulation technologies such as Vagus Nerve Stimulation (VNS), Responsive Neurostimulation (RNS), and Deep Brain Stimulation (DBS). These developments involve improvements in electrode design, stimulation algorithms, and integration with advanced imaging and monitoring systems. Additionally, the aging population, improved diagnostics, government initiatives, and a trend toward minimally invasive surgical procedures are propelling demand.

Product Analysis

NeuroOne’s flagship offering, the OneRF™ Ablation System, holds a unique position in the epilepsy treatment market as the only FDA-cleared sEEG-guided radiofrequency (RF) platform that offers both diagnostic and therapeutic capabilities through a single electrode. This technological integration allows for streamlined procedures, which can reduce the number of surgeries required, shorten hospital stays, and even enable bedside ablations. The Evo sEEG and Evo cortical electrode platforms, which are also FDA-cleared, feature thin-film, high-resolution designs that aim to minimize immunological responses and improve signal quality. These electrodes have demonstrated clear benefits in clinical settings, such as at the Mayo Clinic, where they were used successfully for epilepsy mapping and cortical recordings. The thin, flexible design has been praised for conforming securely to the brain surface, reducing trauma, and producing high-fidelity recordings. NeuroOne is also developing new RF ablation systems, including a device for trigeminal neuralgia, with a 510(k) submission planned for early 2025. (BioSpace, 2020–2023; Yahoo Finance, 2021; AInvest, 2025)

Growth Potential

Although NeuroOne Medical Technologies Corp. (NMTC) currently represents a small portion of the epilepsy device market, its projected FY2025 product revenue of $8–10 million would equate to approximately 1.5–1.8% market share based on current figures. The potential for growth is underscored by its FDA-cleared OneRF system, which offers a first-mover advantage in sEEG-guided ablation. Through its exclusive distribution agreement with Zimmer Biomet—a globally recognized MedTech firm—NeuroOne gains access to a well-established sales network, which could accelerate hospital adoption. The company’s long-term outlook also includes expansion into additional indications and markets, such as trigeminal neuralgia and chronic pain, using its proprietary electrode technology.

If NeuroOne successfully penetrates the 200+ Level 4 epilepsy centers in the U.S., it could see significant revenue gains. For example, if 100 centers adopted the system and conducted 10 procedures annually at $10,000–$20,000 per procedure, annual revenues could range between $10–20 million. That alone would push NMTC’s market share toward 2–4% in the total epilepsy device space. With ongoing clinical validation—evidenced by over 90% seizure reduction in treated patients—and new CMS reimbursement codes supporting its usage, the company is well-positioned for broader adoption. (AInvest, 2025; GlobeNewswire, 2024)

Mayo Clinic Connection

NeuroOne has had a longstanding collaborative and financial relationship with Mayo Clinic. The Evo cortical electrode and the Evo sEEG electrode technologies were both co-developed with Mayo Clinic and other academic institutions, including the Wisconsin Alumni Research Foundation (WARF). Mayo Clinic was not only involved in the early development of these platforms but also performed the first human commercial use of the Evo cortical electrode in December 2020 and the first clinical case using the Evo sEEG electrode in May 2023. Both procedures were conducted by Dr. Jamie Van Gompel, a noted neurosurgeon and co-developer of the technology, who praised the products for their thin-film design, secure brain conformance, and high-quality recordings.

In addition to its clinical role, Mayo Clinic made a financial investment in NeuroOne during Q2 2021, acquiring 181,754 shares at an average price of $7.01. This stake represented approximately 1.33% of Mayo’s investment portfolio at the time. Furthermore, Mayo Clinic and Dr. Van Gompel maintain financial interests in the technology, and any revenue received supports the institution’s non-profit mission. (BioSpace, 2020 & 2023; Yahoo Finance, 2021)

Conclusion

Conclusion

NeuroOne Medical Technologies Corp. (NMTC) represents a compelling asymmetric investment opportunity in the medtech space, particularly within the underpenetrated and growing epilepsy treatment device market. Backed by a highly differentiated product—the OneRF™ Ablation System—which uniquely combines diagnostic and therapeutic capabilities in a single, FDA-cleared platform, NMTC is well-positioned to capture share from a $500M+ global market projected to grow at a 4.1% CAGR.

The company’s recent momentum is underpinned by accelerating product revenue, strong clinical outcomes (over 90% seizure reduction in treated patients), and a transformative commercial partnership with Zimmer Biomet, one of the largest players in the global medical device industry. With Zimmer’s infrastructure now driving distribution, NMTC is poised for scalable growth, and its $3.2M in organic Q1 product revenue—before full Zimmer rollout—demonstrates significant early traction. Additional tailwinds include a newly issued CMS reimbursement code, potential expansion into other neurology indications like trigeminal neuralgia, and an extended cash runway through FY 2026 following a recent capital raise.

Beyond financials, NMTC’s credibility is bolstered by its longstanding relationship with Mayo Clinic, which not only co-developed its core technology but also became an early clinical adopter and financial backer. Insider buying by executive leadership further signals internal conviction in the company’s future prospects. Moreover, media attention, such as a Fox News story detailing a patient’s transformation from nightly seizures to complete seizure freedom using OneRF, reinforces the technology’s life-changing impact.

While risks remain—such as execution dependence on Zimmer Biomet, ongoing regulatory hurdles, and limited cash reserves—these are counterbalanced by the company’s unique IP, expanding product portfolio, improving financials, and strong strategic positioning. For investors with a high-risk tolerance and a long-term view, NMTC offers a rare combination of breakthrough technology, clinical validation, and early commercial momentum at a deeply discounted valuation. This makes it a “Buy” in our view.

Why does this opportunity exist?

In December 2024, shares of BioAge Labs (NASDAQ: BIOA) tumbled significantly—dropping by over 76%—primarily because the company abruptly halted its STRIDES Phase 2 clinical trial for its experimental obesity drug candidate, Azelaprag. The trial was discontinued after several patients exhibited elevated liver enzymes (liver transaminitis), a safety signal that raised concerns about the tolerability and risk profile of the drug.

Now, investors thought BIOA has virtually nothing else to offer, prompting in the following share price action:

However, we at Ragnarok Research have bought shares of BIOA because we believe that the 80% dip was a huge overreaction, and that Bioage has an undervalued ‘hidden’ asset that can spur growth in both the income statement in the future, while having a tremendous amount of value in its balance sheet.

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Read Hunterbrook’s original thesis: https://hntrbrk.com/bioa/

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The diagram below should be a testament to how much of ZDGE’s core business’ earnings resilience is being masked by Gurushots:

However, this isn’t a bad thing. We highlighted in part I that because Gurushots is such a drag on ZDGE’s overall bottom line, even a slight improvement in Gurushots’ operating structure should contribute to a material improvement in the holdco ZDGE’s bottom line- mainly via cost cutting and revenue expansion. Thankfully, management has taken notice of these issues, and has announced a cost-cutting initiative, like reducing headcount by 22%, mostly impacting Gurushots. Sure. The PR also talks about ‘Gurushots 2.0’- an initiative to completely reimagine gameplay and monetisation policies to help Gurushots to add value to Zedge, rather than subtract it. Sure, they know exactly how to reduce costs and ‘leanify’ Gurushots- but what about the revenue growth part ? What about inducing exploding growth to Gurushots ?

To answer these questions, we commissioned our own in-house research to see what went wrong with Gurushots via mass surveys and conversations with industry experts. We then shared our findings with ZDGE’s CEO and Gurushots’ Product-head, and gained a lot more insight into how Gurushots 2.0 is going to be executed.

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Since our advice to management, as well as our full interaction with them is embedded in a writeup that is too long for this substack, we have attached the PDF to this post. Please download it to read.

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Disclaimer:

The authors of this publication do not give any buy or sell recommendations and do not ensure any correctness to our claims or findings. Under no circumstances would you hold the authors liable for any investment losses. One should assume that any sentence or statement in our posts can be inaccurate and factually incorrect and should not influence anyone’s investing.
Sincerely,
Ragnarok Research

We see pundits on Twitter yap about margin of safety and undervaluation- but what does it mean ? We think ZDGE symbolises all those attributes of a perfect investment, with a touch of long-activism from us.

ZDGE’s core business is resilient, and management is doing evetrything it can to bolster it up. ZDGE’s failing subsidiary however, needs help, and management launched a cost-saving program pertaining to it. In this deep-dive, we provide readers our reasons for which ZDGE, in a few years, will be a multibagger as per us, and we highlight the reasons why the stock price is down, and if management’s turnaround fails, we still see 50-250% upside in case of a divestiture. In part II of our writeup which will be released soon, we will provide management a roadmap to transform ZDGE from a Doozy into a multibagger. We also highlight how easy it is for a shareholder friendly management, like the present ZDGE management, to transform Gurushots into a money-maker- even if they don’t follow our guidelines.

We also point out the margin of safety- about 50% of the market cap is net cash with miniscule debt- with virtually no possibility of a bankruptcy! In our humble opinion, if management is smart, this investment is so safe that our bear case scenario in an efficient market is up 50% if the turnaround doesn’t work!

Investment thesis Summary:

• Core Business Resilience: Zedge operates a steady and cash-generating phone personalization app business, contributing significantly to its revenues despite the fading COVID-era demand spike.

• Low Valuation & Margin of Safety:
  Valuation metrics are extremely attractive, with a Price-to-Sales ratio of 1.26 and an EV/EBITDA of 12x, indicating a heavily discounted stock.

• Strong balance sheet with $20 million in cash against a $38 million market cap, providing a significant margin of safety.

• Past Challenges: The ill-fated Gurushots acquisition temporarily dragged earnings into negative territory due to high costs and impairment charges. However, these write-offs are complete, removing a major overhang on the stock.

• Turnaround Potential:
  Management has announced a 14% workforce reduction, focusing on Gurushots cost containment, signaling a renewed commitment to profitability.
  
  Gurushots is now a low-risk "call option" within the company, since ZDGE has written off virtually all of Gurushot’s asset value that needed to be removed from its books. Even though Gurushots contributes to almost 100% of ZDGE’s operating losses, effective monetisation and earnings growth from Gurushots can help turn ZDGE into a multibagger.. In the part II of this Writeup, Ragnarok Research will give a blueprint that management can use to turnaround and restructure Gurushots!
  
  

• Value-Generating Initiatives:
  Management is bolstering core business via strategic use of AI to enhance the core business by offering innovative phone customization options (e.g., AI-generated ringtones and wallpapers).
  
  Aggressive share buyback programs—$5 million approved—retiring up to 13% of outstanding shares at current prices.

• Investment Safety: Even in the worst-case scenario, where Gurushots fails to turn around, a divestiture would substantially boost profitability and unlock shareholder value, which we estimate will drive share price 50-250% higher if management gives up on the turnaround and divests gurushots.

• Easy path for management: In this writeup we emphasise how clear of a path management has to implement a turnaround. In Part II, we will release steps management can take, after extensive DD- via testing of the gurushots platform, and conversations with users. Gurushots is a beloved brand in the photography community, especially amateurs, but they hate the pay-to-win aspect of Gurushots and if handled properly, which we believe management will do- especially if they follow our research and guides- will result in a multibagger.

• Compelling Upside: ZDGE is an undervalued stock which holds a key hidden underperforming asset which management is eyeing to bring back. A turnaround is definitely possible because all that needs to be fixed is the monetisation of gurushots and incentives. In the off-chance that this doesn’t work, ZDGE has a huge margin of safety due to its strong balance sheet, and a resilient core business, which if ZDGE focuses on solely by divesting gurushots, is worth about 50-250% more than it is valued today.

Introduction

Zedge is a 38-million dollar company, valued 12x EV-EBITDA that makes an wallpaper app that you find in google play store, for which you can pay a small amount for custom animated wallpapers, and phone personalisation in general.By phone personalisation, we mean custom notification sounds, wallpapers, ringtones, etc., It isn’t a high-tech, attractive software company, which is partly the reason that it trades at a low valuation (1.26 Price-to-sales, and 8 Price-to-cash). The share price paints a story:

The stock started surging at 2020, the covid era, when bored users started splurging money on ‘phone customisation’, and as the covid hype faded away, the stock cratered. This is where the market made a mistake. The market correlated the stock directly to covid spending. For example, look at ZDGE’s revenue graph:

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Revenue has been steadily rising even after covid effects subsided. In fact, it has tripled since 2020.

But then, surely the market can’t be this stupid, right ? Well, investors first sold ZDGE stock for the covid hype fading, but didnt buy them backdue to Its earnings:

Also its Operating income:

Earnings quickly took a dive and is accelerating down due to an explosion in costs. Operating income 153k in FY 2024, while net income was -9M- mainly due to impairment charges related to the gurushot acquisition(Ebitda was 2.6M in FY 2024). An unprofitable software company(accounting for writedowns) with negative sentiment is a recipe for low valuations, which is reflected in the stock price.

What went wrong ?

The sudden dip in earnings caused by one primary factor: The gurushots acquisition. In April 2022, ZDGE announced that it was acquisiring a company called gurushots. Now gurushots, which you can see for yourself here, is a photography game. It is a pretty good concept- where users compete on who takes the best photos and you ‘move up the ranks’ with different badges. While this is a great concept for aspiring photographers, gurushots is not a moneymaker. The thing about acquisitions is you get a new revenue stream … but in the expense of new costs (salaries of new employees, integration costs, etc.). In ZDGE’s most recent quarter, ZDGE earned 7 million in revenues, of which just 644k was attributed to gurushots. That is basically peanuts as far as materiality goes. In the yearly scale, we see the following proportions:

Dark blue being normal Zedge core business, and light blue being Gurushots.

But we suppose it is not all that bad because gurushots is contributing something to revenues. However, the catch is it is contributing a lot to the costs:

These are figures from ZDGE’s most recent quarter. Earnings this quarter was -457k. However, if we pretended Gurushots did not exist, ZDGE’s income from operations would have been +934k! About 1.3 million more! And this is not counting the exorbitant impairment charges ZDGE has been taking! However, management in FY 2024 10-K revealed that the write-downs related to gurushots are basically over:

Recall how we saw a sudden dips in operating income starting 2023 ? Here is what the chart of ZDGE’s income from operations chart would look like, had ZDGE not acquired gurushots:

Blue: Present Income from Operations of ZDGE
Red: Income from operations without gurufocus

Because of the acquisition, we have seen earnings tank into the negative territory, with management, in FY 2024, taking a 11 million dollar impairment charge relating to gurufocus(which will not happen going forward), not to mention Operating income dipping from about 9 million in 2022 to 153k in 2024 due to the huge SG&A costs related to Gurushots.

But the funny thing is, the PE ratio(here, definition being market cap/net income) had the gurushots acquisition not have happened, would have still been a meagre 6.71(as of FY 2024, if we discount loss from operations from gurufocus, along with its related impairment charge), or more recently 10.17(as of latest quarter, annualised) … a criminal undervaluation for a software company… not to mention ZDGE has 20 million dollars worth of cash against a 38 million dollar market cap, with just about 200k in debt, bringing Price-to-cash to more than 50% … Talk about a ‘safe’ investment!

So … we have a core business which is pretty resilient so far, which is being weighed down by a bad acquisition.… But we believe management can nullify every single thing that is keeping the stock down pretty easily.

The value creation opportunity

Based on the facts stated above, it is clear that the main problem with ZDGE is Gurushots. Now, the two things ZDGE could do is either divest Gurushots, or turn it around and bring back earnings and revenue growth. Below, we dig deeper into each of the value-generating moves we believe ZDGE should make. To be clear, we think ZDGE should/would pick the latter option.

Divest/Sell Gurushots. Impact: Highly positive. Likelihood: Almost 0

Just to be clear, our long-term plan for ZDGE would be to turnaround Gurushots to turn it into a money-generating machine. We want to highlighted divestiture as an option to show how even the worst-case scenario of the gurushots turnaround not working can be a great thing for the share price via a divestiture. This is a great margin of stock since even the worst-case scenario of gurushots would yield a share price appreciation for ZDGE.

Say ZDGE’s turnaround doesn’t go as hoped and management wants to get rid of Gurushots. What happens then ?As high highlighted earlier, ZDGE’s PE ratio without gurufocus is at an outrageous 6x(FY 2024- stripping out gurushocus related impairment and amortization charges and SG&A) or 10x(As of latest quarter annualised). Now that management has already pointed out that there won’t be such large write-downs going forward because about 100% of the assets related to gurushots have been written off, Gurushots is basically a sitting duck:

The only thing Gurushots is contributing to ZDGE, it its sky-high operating expenses such as Gurushots’ employees salaries, etc. The market hasn’t been valuing ZDGE properly because it views ZDGE has a decelerating software company which made a blunder of an acquisition with miniscule operating income, while failing to see the resilient core business. If we strip ZDGE off of Gurufocus via a sale or divestiture and get rid of its operating costs(like SG&A, salaries… etc), we believe the market will re-rate Gurufocus from a 6x to atleast a conservative 15x PE ratio, representing a 50-250% gain from current price levels, mainly due to the realisation that operating income would jump from 0.15million to about 5 million immediately, assuming FY 2024 numbers. Refer to the following chart again:

This is a conservative estimate, considering that a company which has a growth runway (more on this in the next point) ,and flipping into positive earnings is a narrative the market has historically loved. In fact, ZDGE’s EV/EBITDA ratio stands at an attractive 12x, even though EBITDA is set to grow when/if Gurushot’s SG&A base vanishes after the sale/divestiture. The valuation is not the only aspect of this decision. Divesting Gurushots will allow management to focus more on the core business, helping them bring growth back to Zedge’s core business using AI, which I address further below in the writeup later.

However, management is hellbent on not shutting down gurushots, and instead turning it around. Look at CEO’s remarks as of most recent earning call:

This is not to say that management might not consider a divestiture in the future, but I don’t believe we can expect it in the short-term. However, with all the Gurushots related write-downs over, it is fair to give management a shot at turning this dud around, especially considering that they said they have taken steps in the past 6 months or so. The good part is, if management fails to turnaround gurushots, they still have a very undervalued core business, and they can divest Gurushots as a last resort and it would still result in a share price appreciation. More about the Gurushots restructuring below

Gurushots’ Turnaround plan: Management has already announced plans to restructure gurushots and cut costs via reduction of employee headcounts, and also look for ways to overhaul Gurushots to become a growth machine.

With all the write-downs and impairment charges relating to the Gurushots over, Gurushots basically acts as a ‘free call option’ within the company since its asset value is virtually 0. This is amazing because Gurushots is this entity that is worth nothing, but contributes a LOT to ZDGE’s costs. Even if ZDGE cuts SOME of gurushots’ costs, it will help ZDGE a disproportionately amount… and in the case of a total turnaround of gurushots, we can see ZDGE becoming more than a 5-bagger. The best part is even if the turnaround fails, divestiture, as mentioned above, will unlock shareholder value.

On the 21st of January 2025, management announced a restructuring plan to reduce ZDGE’s headcount by 14%, mainly by letting go of Gurushots employees. This is the stripping of costs we were talking about:

Gurushots’ acquisition has contributed so much to ZDGE’s SG&A expenses, and it is one of the primary reasons ZDGE’s operating expenses is miniscule. After layoffs and a sort of ‘leanification’ of Gurushots, management is improving the bottom line of income statement of ZDGE, while preserving the option to exponentially improve both the topline and the bottom line

Next, the restructuring plan involves other cost-savings which will save 1.7 million in pre-tax(this incoludes the layoffs), which implies about 15% of FY 2024’s pre-tax losses(Pre-tax income was -11.37). This makes our analogy of a free call option even better- management seems to be focused on lessening the drag impact Gurushots seems to be having on ZDGE, while preserving all possibility of a turnaround and turning Gurushots into a growth machine!

Other than a divestiture, this will be the highest value-generator for ZDGE in our opinion. Gurushots cannot make money for the life of itself at the moment- but if that changes, we can see a world’s worth of multiple expansion. So- management knows how to cut costs by firing people and lowering user acquisition costs, but what about actually inducing growth to Gurushots ?

Yes, management does say that they are still figuring out the roadmap to turn-around, but Ragnarok Research has done due diligence on this topic and webelieve that Gurushots is one of those ideas that are great for the photographic community, but just hasn’t found the right way to monetise yet. When ZDGE did try to monetise it, players started complaining of it becoming a pay-to-win. Now, management wants to fix it and are confidence about their options. This attitude can be seen in management’s reluctance to divest or shut down Gurushots- because it is a strong brand in amateur photography!

Best part is, management plans to attack this monetisation problem directly:

As stated, Zedge wants to overhaul gurushots and rethink its entire monetisation policy and make a new player experience. This is a step in the right direction, and it is almost undeniable proof of how shareholder-friendly management is. Our main conviction in Gurushots’ turnaround is that the problem is clear: the concept of a competition for amateur until Gurushots became a pay-to-win. This is not a very hard problem to fix because the concept is great and photographers even agree. Look at some trustpilot reviews:

In Part II, we will touch up on how management can actually turnaround Gurushots.

To be clear, we have full confidence in what management will come up with- and this is just our 2-cents. Even if management does not take the steps we list out, we will remain long because management’s docs is at a turnaround of gurushots and cutting costs- which is all we ask for.

Other Value-Generation views management is pursuing right now:

ZDGE has a fairly competent management team, which is doing everything it can to help out shareholders by taking measures to unlock shareholder value in other avenues as well. Here are some of them which makes us confident that ZDGE is a good long-term investment, assuming ZDGE handles Gurushots in either of the two ways highlighted above.

Accelerate growth of ZDGE’s core business. Impact: Positive. Likelihood: Almost 100%
We see great growth opportunities ahead of ZDGE, especially after the most recent earnings call. We all know how Generative AI is taking the world by storm- from Sora, to ChatGPT, etc. ZDGE wants to capitalise on this opportunity. Instead of offering plain wallpapers and sounds to users, ZDGE is transitioning into a paid model where users themselves can create and customise their own sounds and pictures. This sets ZDGE on a path to capitalize on growing AI trends where users are virtually paying for an AI-agent that streamlines the process between giving a prompt, and embedding the end result to your phone via wallpaper, ringtone, or notification sounds:

A valid concern an investor may have is ‘wait, why can’t I use something like Sora myself, and use that as my wallpaper?’. Well wallpapers aren’t the only offering of ZDGE. It specialises as phone-customisation specific products, like AI-made ringtones(Will roll out soon as per management), custom app icons … things that are hard to integrate from an image to the UI of a phone. ZDGE merely streamlines that process.
The most recent quarter actually suffered a decline in advertising revenue due to a one-off, which has been rectified:

So, our latest quarter annualised PE ratio of about 10x is actually inflated due to a one-off advertising bug and some ‘integration complexities’ from adtech partners which is supposed to normalise going forward. Goes to show how undervalued the company is. This decision by management, according to us, will further bolster ZDGE’s core business. Returning growth back to ZDGE’s business can be better done if management is solely focused on the core business, instead of dividing attention between the core, and gurushots. So, we believe this action goes hand-in-hand with the divestiture/sale of gurushots.

The value generation classic that management is already implementing: Share buybacks. Impact: Positive. Likelihood: Almost 100%

A classic maneuver in the value generation playbook is ramping up buybacks- and the best part is, this is exactly what ZDGE is doing. ZDGE recently just approved a 5 million dollar share buyback program:

This is extremely bullish in our opinion, considering ZDGE just completed a 3 million dollar share buyback last july. This just goes to show how confident management is in their strategy. Even if we disregard that, a 5 million dollar share buyback would retire, roughly 13% of the shares at current prices, making the company even more undervalued and even more primed for share appreciation when funds start valuing it as a profitable, and growing company, assuming the two steps above are also successfully taken.

Risks

One of the main risks to the thesis is Gurushots not turning around as we hoped- but that is also a pillar of the investment thesis. Even if it does nt work out, a divestiture will be extremely value-generative due to the market likely performing a multiple-rerating to price in the resilient core business of Zedge.

Conclusion
We have not seen a company like ZDGE in a long time. This is a software company valued 12x Ev-Ebitda, but with an extremely depressed Ebitda which management is working hard to fix. Soon, market will catch up like it always does and we believe that this has multibagger potential. Sure, the actual turning around of Gurushots might be hard, but even if it all doesn’t work out, it ends well for ZDGE. In our view, this makes ZDGE a strong, screaming buy.

In Part II, we will release a set of guides we think management should/will take to transform solely gurushots. This writeup was to highlight the attractive opportunity in the total entity, which is Zedge Inc,. Nothing more. The part II will be way more comprehensive. An activist bet can’t be made on ZDGE because a majority stockholder controls virtually 70% of the voting rights, so activism isn’t really an option- however sending out Part II into the ethos in hopes that management reads it and gets some inspiration is our goal- other than a fun little exercise to challenge ourselves.

TransMedics Corp is a medical technology company specializing in systems to preserve, monitor, and transport donor organs such as hearts, lungs, and livers. Its Organ Care System (OCS) enables longer preservation of organs outside the body, significantly improving transplant success rates. Over the past five years, TMDX’s stock has surged 300%, fueled by accelerating adoption of its OCS program. Quarterly revenues have risen from $42 million to $109 million in just seven quarters.

However, Q3 2024 marked TMDX's first negative quarterly revenue growth since 2022. Management attributed this to temporary factors, including maintenance on its organ transport fleet, which reduced the number of flights undertaken and caused revenue declines. The maintenance also increased costs as TMDX relied on third-party planes for some trips, further compressing gross margins. Importantly, management indicated in the earnings call that these challenges should normalize going forward, setting the stage for material gross margin expansion in subsequent quarters. Despite this, the stock has dropped ~50% from its all-time highs (ATH), and as of 28th November 2024, almost 30% of the float has been shorted. This presentsa compelling buying opportunity to the contrarian, and intelligen investor.

We are long TMDX for the following reasons:

Investment Thesis:

1. Strong Operational Recovery Points to Record Q4 Performance

In Q3 2024, TMDX reported a fleet of 18 planes for organ transport. Using FAA data and jetspy.com, we tracked monthly flight activity and found the fleet's operations have significantly rebounded in Q4:

• 2024 Flights by Quarter

  • Q1 (14 planes): 661 flights

  • Q2 (17 planes): 1,474 flights

  • Q3 (18 planes): 1,376 flights

  • Q4 (as of Nov 28, 18 planes): 1,012 flights

The reduced number of flights in Q3 stemmed from fleet maintenance, which limited operational capacity and necessitated the use of costly third-party planes. These factors weighed on gross margins and overall profitability. However, with the fleet performing better, TMDX performed 17.4 flights per day in Q4 (as of Nov 28), projecting 1,570 flights for the quarter—a record high. Historically, December sees elevated transplant activity due to alcohol-related accidents, suggesting an even stronger Q4 finish.

Despite low transplant volumes nationally, TMDX’s rising flight numbers signal growing market share and adoption of its OCS technology. The normalization of fleet operations should also lead to lower costs and margin recovery in Q4 and beyond, making us confident in robust earnings growth and outperformance in upcoming reports.

2. Resilience Amid Temporary National Headwinds, Setting the Stage for Explosive Growth

National transplant volumes have declined in Q3 and early Q4 2024 due to cyclical factors. Data from the Organ Procurement and Transplantation Network (OPTN) illustrates this trend:

• 2024 Transplants per Day

  • Q1: 31.64

  • Q2: 32.98

  • Q3: 31.4

  • Q4 (as of Nov 28): 30.07

Such declines are typical during this time of year. Transplant volumes historically peak in December and Q1, driven by seasonal factors like increased alcohol-related accidents. These cyclical lows have weighed on TMDX’s Q3 performance and investor sentiment. However, this temporary dip in transplant activity obscures a critical trend: TMDX has significantly expanded its market share and captured more customers, even during a period of reduced demand.

Market Share Gains Amidst Headwinds

TMDX’s operational resilience and aggressive market expansion are evident in its growing flight numbers. While overall transplant activity in the U.S. has hit yearly lows, TMDX’s fleet activity is on track to achieve record highs in Q4 2024. This signals that hospitals are increasingly adopting TMDX’s Organ Care System (OCS) and shifting transplant orders to the company.

This means that TMDX has signed up new customers during this period, leveraging its technological edge and superior outcomes. These new customers, combined with existing ones, are likely to significantly increase transplant volumes as overall demand normalizes. This sets the stage for a substantial boost to TMDX's revenue in 2025 when seasonal factors drive transplant volumes higher.

Revenue Explosion in 2025 and Beyond

1. More Transplant Orders Despite Lower Volumes: TMDX has demonstrated its ability to grow transplant orders even in a low-demand environment, thanks to its aggressive market share expansion. This growth is particularly significant because new and existing customers will perform more transplants in 2025 when national transplant volumes rebound due to seasonal factors. As transplant volumes rise, these orders will translate directly into a significant surge in earnings.

2. Seasonal Tailwinds: December and Q1 have historically been the busiest periods for organ transplants. With TMDX’s fleet operating at peak capacity and an expanded customer base, the company is uniquely positioned to capitalize on this surge in demand.

3. Widening Adoption Curve: Hospitals that adopt the OCS system during periods of operational stress are unlikely to revert to traditional methods, ensuring sustained growth in transplant orders as demand normalizes.

Mispricing of Growth Potential

Investors have failed to appreciate the strategic importance of TMDX’s market share gains. The company is being punished for temporary cyclical factors, even as it lays the groundwork for outsized growth. The increase in transplant orders during a historically low-demand period suggests that TMDX is becoming a critical player in the organ transplant ecosystem.

As transplant volumes return to normalized levels, TMDX’s outsized market share will magnify revenue growth. This misalignment between the company’s operational performance and market sentiment creates a unique opportunity for investors to capitalize on a temporary inefficiency.

As a side note, the unravelling of the short interest, which we think may induce some buying pressure from short-covering, can be a reason for future short term price appreciation as well. This, coupled with the end of tax-loss selling in 2025, serves as some great ‘technical’ catalysts.

Valuation

TMDX is currently valued at 7.2x trailing twelve-month sales, which reflects the market's acknowledgment of its high growth potential and dominant position in the organ transplant ecosystem. While this multiple is higher than traditional medtech averages (typically in the 3–5x range), several factors make it attractive:

• High Growth Rate Justifies Premium:
  TMDX has grown its quarterly revenue from $42 million to $109 million in seven quarters, an annualized growth rate far outpacing traditional medtech firms. This growth trajectory supports a higher sales multiple, especially given its market dominance in the OCS space. TMDX has a huge growth runway even if we exclude all the analysis done in this writeup. Apart from the Liver segment(accounting for about 70% of revenyes), TMDX is on track to launch its OCS Lung clinical program to drive adoption, and is investing further capital to expand market share on the heart and lung segment as well!

• Market Leadership with Minimal Competition:
  TMDX operates in a niche market with limited competition, providing it with a significant moat due to it being the only FDA-approved solution. The Organ Care System (OCS) is a revolutionary technology that hospitals are increasingly adopting, as evidenced by rising flight activity even in a low-demand environment. This unique position reduces the risk of immediate margin compression or disruption, making the premium valuation more defensible. Since TMDX’s solution is the only FDA-approved product, TMDX can easily expand its solutions to multiple transplant-able organs and gain market share. According to investor presentations, this is its primary goal- to expand utilisation and adoption via its clinical trials for the lung and heart segment. In the Q3 2024 Earnings call, the CEO of TMDX said ‘our clinical programs that are designed for next year is to expand our reach even further in lung and heart and tackle areas that we have not tackled yet’.

• Explosive Revenue Potential Ahead:
  The current multiple does not fully account for the substantial revenue growth expected in 2025. With TMDX signing up new customers, increasing transplant orders, and benefiting from seasonal tailwinds, its revenues are poised for an outsized surge when transplant volumes normalize. This forward-looking growth could compress the sales multiple significantly in the coming quarters, offering upside for investors.

• Gross Margin Expansion and Operating Leverage:
  The normalization of fleet maintenance costs, reduced reliance on third-party planes, and rising volumes will drive significant gross margin expansion. As operating leverage kicks in, profitability will scale faster than revenue, further justifying a higher multiple.

Peer comparison

While TMDX’s 7.2x sales valuation is higher than the medtech industry average, it remains reasonable compared to high-growth, innovative peers in adjacent healthcare technology spaces. Many growth-focused medtech or biotech firms with disruptive technologies trade at 10–15x sales, particularly when they are at an inflection point for profitability. For instance:

Intuitive Surgical (ISRG), a mature leader in robotic-assisted surgery, which is almost at the end of its growth curve, trades at a lofty 24.5x sales

Xvivo Perfusion(STO: XVIVO), A peer of TMDX operating in the organ preservation industry, trades at about 19x sales.

Given TMDX’s unique position, early-stage growth curve, and limited competition, its 7.2x multiple appears relatively conservative, especially as revenues are set to accelerate.

Risks:

• Fleet Maintenance: Persistent fleet issues could increase costs.

• Prolonged Transplant Volume Decline: A delayed recovery in transplant activity would hinder growth.

• Competition: Although minimal now, new entrants could erode market share.

Catalysts:

• Earnings Confirmation: Future reports should validate that growth remains intact.

• Normalization of Transplant Volumes: Seasonal recovery in 2025 will amplify revenue.

• End of Tax-Loss Selling: This temporary pressure should subside post-Q4.

Conclusion:

TMDX represents a compelling opportunity in the medtech space. Despite temporary setbacks, the company continues to expand its market share and demonstrate resilience during a cyclical downturn. With strong tailwinds on the horizon—normalizing transplant volumes, a robust flight recovery, and a misunderstood Q3—TMDX is well-positioned for explosive growth in 2025. At current valuations, it is a screaming buy for long-term investors.

Executive Summary:
Ragnarok Research is long Columbia Banking System, for mainly three reasons:

1. COLB has been punished by the market for missing analyst’s earning expectations in Q4 2023, with the stock being hammered about 30% since Jan 2024, and 24% since its Q4 results date(Jan 24th):
   

   

   
   This mispricing has created an attractive buying opportunity, and insiders are racking up shares since they realise the egregious value proposition which this decline has presented:
   

   

   

(Green dots representing buys, with red dots representing sells. Notice the volume of buying in such a short timeframe has never seen before since 2016?)

2. The market has failed to realise that the 20% drop due to disappointing earnings is completely unwarranted, and were due to one-off problems that are likely to never repeat in, say Q1 2024. Management also believes this, as reflected in language used in earning calls and investor presentations, and obviously, insider-buying behaviour. We believe COLB is poised to surprise skeptics in the coming quarters

3. The recent selloff has rewarded investors to buy COLB’s stock at a valuation cheap valuation that presents itself once-in-a-lifetime. The cheap valuation provides an opportunity of asymmetric return, with the discounted price serving as a margin of safety.

4. Ragnarok Research assigns a short-term(2-3 months) Price Target of about 25 US Dollars, representing a conservative 30% gain from current levels. 

Part I: the reason for the decline:
COLB is a relatively simple business, as described in its 10-K:

https://capedge.com/filing/887343/0000887343-24-000089/COLB-10K-2023FY#i6efef15136974c6e93d1638f2fc2e1ba_16

COLB is your typical bank that offers wealth management, financial planning, mortgage, and other services to corporate, institutional, small business, and individual customers. 

It is a financial holding company that, recently, has had a lot of selling pressure due to misinformed investors blowing its recent earnings disappointment out of proportion.

On the first glance, it does seem bad:

A 44% negative surprise in Earnings is something that can scare off any investor bullish on COLB. But what was the reason for the drop in net income ?

Below is quarterly revenue since Q2 2022:

COLB’s revenue actually increased by a tiny amount from Q3 to Q4. The reason for low net income was increased non-interest expense:

Non- interest expense increased by 65 million dollars from Q3 to Q4. 

At first look, this is a dire cause for concern, and a practical, “intelligent” investor would consider closing his/her position in the stock. 

But, what investors faile to recognise is that the increase in expenses is temporary, and COLB is poised to make a killer comeback in the coming months.

For instance, in COLB’s Earning release document:
​​https://s26.q4cdn.com/577104185/files/doc_earnings/2023/q4/earnings-result/COLB-2023-Q4-Earnings-Release.pdf

As the CEO himself said, “one-time” expenses were the perpetrators of the increase in expenses.

First off, COLB has incurred 2 one-off expenses(see highlighted in blue):

https://s26.q4cdn.com/577104185/files/doc_earnings/2023/q4/earnings-result/COLB-2023-Q4-Earnings-Release.pdf

1) Merger related expense(7 Million in Q4) with regards to its merger with Umpqua bank. The expense is decreasing quarter by quarter, and we expect this to turn negligible by the first half of 2024.
2) FDIC Assessments(33 Million in Q4), which can be explained via the 10-K:

Basically, the next time COLB incurs FDIC(Federal Deposit Insurance Corporation) assessment fees(standard probes by a governmental agency) as much as 33 million dollars in a single quarter, it will be at the end of 2024, according to our understanding. This is ample time for COLB to cut back on other one-off expenses, as explained by management in their fourth-quarter earning call:

https://capedge.com/transcript/887343/2023Q4/COLB

As it is clearly said, some expense line items in Q4 2023 were ‘elevated, and not expected to continue at those levels’. 

Bottom line- in Q1 2024, the 33 million FDIC expense would vanish, so would some of the merger expense, and some of the extra ‘expense line items’ as well.

The main perpetrator of the selloff is, ultimately, the FDIC assessment costs- something the market fails to recognise as an expense which will only be incurred at the end of every year, for the next 8 quarters(2 years).

A 20% drop with an increase in revenue can only signal that the market is misinformed about the nature of the expenses, since it was the net income that ultimately ‘disappointed’ the market(EPS disappointed by about 44%, while revenue disappointed by only 3%)

Part II: Absurdly low historic valuations:

Since this writeup mostly focuses on a short-term trade based on the market being slightly ‘misguided’ according to us, we won’t pay a lot of attention to valuation. However, a few figures we just snagged from Simply Wall Street:

(COLB trades at a 2.3x PS ratio, with the average being 5.1x. This implies about 100% upside according to simply wall st.)

COLB, again, trades at 11.6x PE ratio, with peer average being 15.1x. This implies about 30% upside.

If we plot the historic Price-To-Sales ratio of COLB, we get:

A historic low.

Something interesting, however, can be seen with its historic PE ratio valuation:

Wherever there is a callout sign of ‘PE: 11’, those are the points in time where COLB had a PE ratio of about 11. The lowest historic price of COLB when it had a PE ratio of 11 prior to now was when it was trading at about 24 USD per share- implying upside of atleast 20%. The highest price, when COLB had a PE ratio of 11, was when it was trading at about 40 USD a share, implying about 100% upside.

Mr. Market has granted us, regular investors, an opportunity to capitalise by buying a mispriced stock at historically cheap valuations. Best part ? Management realises this, and have been racking up shares.

Part III: Management realises the absurd bargain and the untapped value in the stock

Does this chart need any explanation at all ?

After the sell off post-earnings, management has clearly realised that the market is misguided, and that COLB is poised to make a comeback in the coming months, and just like every other team of executives, they want to get rich(not always good- but in this case, we’ll give them the benefit of the doubt haha)

For instance:

It is pretty evident that the trades were done post-drop.

The cluster buying is by the following executives:

Amidst selling pressure of a stock, the set of people that have the most informed idea of a stock’s future moves, is ultimately management. There’s a saying: “Management can sell stock for any reason, but they buy for onle one: The think the stock price will go up” and what better set of people is there to base trading decisions on ?

Conclusion:

While we do are not pitching COLB as a hold-forever stock, we are sure as hell that it is one of the most attractive short-term opportunities. It provides a positive asymmetric return opportunity, due to all the reasons listed above- and the best part ? Management agrees with me, based on buying behaviour. 

Something interesting is that one of these insider buys were by CEO Stein Clint, and the last time he bought COLB, shares proceeded to rally 100%:

Again, there is always the argument that “markets can stay irrational longer than you can stay solvent”. Well, the margin of safety is the following:

- Even total liabilities deducted from an total assets amount more COLB’s market cap(assetts-liabilites=5B)

- COLB’s annual revenues have been in a constant state of increase since 2017, even though COLB’s stock is down about 55% since 2017:

Revenues going up quarter-to-quarter from 2017 to 2023.

1. We see a lot of similarities between AMZN/BABA a few years ago, and CPNG now. But, Coupang’s narrative is far less optimistic than that. We provide the reasons why the market is underestimating the likeness between CPNG and the other big E-Commerce stocks.

2. One of the reasons for a slight decline in Coupang’s earnings is due to ‘higher content costs’ associated with its ‘Coupang Play’ app. But Coupang Play has very recently exhibited explosive growth in installations and usage, and we think that Coupang Play is on track to earn higher revenues, enabling them to fully cover ‘content costs’.

3. The stock seems to have found a stable support right about current levels, and seems like it is poised for a breakout.

4. Shares have been beaten down so much that they are a bargain at this point

   

Coupang, A Diamond In The Rough

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Vita Coco Company: An overvalued business which has undisclosed Supply Chain problems, coupled with loss of distributors and partnerships with unethical companies.

1) The Vita Coco Company(COCO) is an American beverage company which sells coconut water. It has had an impressive stock boost of about 100% YTD, due to increased revenue and market share. But, we at Ragnarok Research think that this will not last due to upcoming problems.

2) Vita Coco announced that they were losing one of their biggest customers, who were responsible for about 20% of their revenues. Still, the stock is up by an impressive margin. But, our real thesis is that Vita Coco might be having some undisclosed supplier problems, as their main supplier of Coconut water is facing serious litigations in Brazil.

3) Vita Coco is a public benefit corporation and claims to do business by ‘harnessing, while protecting, nature’s resources for the betterment of the world’ and ‘creating ethical, sustainable, better-for-you beverages and consumer products that uplift communities and do right by the planet’.
But, we think Vita Coco has a partnership with a company(which is a part of COCO’s supply chain) which engages in criminal activities and fraudulent business activities by endangering tribal lives in Brazil.

4) Expanding upon the point above, we think that it is not unlikely that Vita Coco has sourced coconuts from entities that may have engaged in Child labour. A good chunk of Vita Coco’s coconuts come from Philippine regions where more than half of the coconuts produced have children involved in the exporting process somehow. Is Vita Coco sourcing from here for ‘cheap labour’ ?

5) Vita Coco has the characteristics of a pump-and-dump, where insiders are looking to cash out. Insiders have a shelf offering to sell 26 million shares of Vita Coco. This is about half the shares outstanding of Vita Coco, which is 56 Million shares.

6) Vita Coco insiders are selling their shares and cashing out.

7) Verlinvest Beverages SA, COCO’s largest shareholder, is the same entity behind the Otaly scam, and there is a lot of influence of Verlinvest in Vita Coco’s Board of Directors.

Reasons why we think COCO’s shares will drop in value in the mid-term:

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1) Problems with Distributor and Supply Chain:

Vita Coco has already disclosed in its most recent quarterly filing that it will be losing one of its biggest customers, which accounted for about 15-20% of their revenues:

This should already have investors worried about Vita Coco’s future outlook.
But there’s more!

Vita Coco heavily depends on its supply chain, which puts it at considerable risk:

They even mention it as a risk factor that any disruptions to their nimble Supply chain could be problematic:

According to ImportGenius(As given above), one of Vita Coco’s top suppliers is an entity in Brazil called ‘Ducoco’, which owns coconut farms and exports coconut water to Vita Coco. As seen in the figure above, Vita Coco depends heavily on Ducoco.

We have recently come across some evidence that Ducoco might present a weak link in Vita Coco’s supply chain due to the amount of litigation it faces.
According to Brazilian media outlets and sources such as News, it turns out that Ducoco has engaged in land grabbing and notary fraud by stealing land from the Tremembé de Almofala Indigenous Land (TI) in the municipality of Itarema.
According to a report ‘Os Invasores: quem são os empresários brasileiros e estrangeiros com mais sobreposições em terras indígenas’ by a rural journalist group in Brazil, one of the properties, Fazenda São Gabriel, has 76.7% of its extension overlapping the IT. The second property, known as Fazenda Aguapé, also has 274.83 hectares within the Tremembé territory. Although the process of demarcation of the Tremembé de Almofala TI began in 1986, the history of the Tremembé territory is centuries old, having been where indigenous people have lived since 1857. The historical relationship between indigenous people and the territory began to be completely disrespected after the company Ducoco, whose headquarters were located in São Paulo.:

We think this is unethical in Vita Coco’s supply chain.
But, the land might be taken away by Ducoco and given to the indigenous people of Tremembé territory.

The demarcation process has already begun, and Ducoco recently appealed to the court for the nullity of this demarcation.
In February 2023, Ducoco requested the nullity of the demarcation process for the TI Tremembé de Almofala. The request was denied by Judge Marcelo Sampaio, of the 27th Federal Court of Itapipoca (CE).
In his decision, the judge found inconsistencies in the company's version, pointing to a possible sign of land grabbing or notary fraud:

This is related to Ducoco. But, due to very recent developments, all companies using tribal land for corporate uses will suffer a loss of assets, since the Supreme Court gave the following ruling:

This, according to us, puts even more pressure on Ducoco since this demarcation operation will be carried out throughout Brazil:

Although there have been efforts to curb the court’s decision by the Senate, Brazilian President Lula is expected to side with the Indigenous People.

We feel that this crucial link in Vita Coco’s supply chain can snap at any moment, considering that the very existence of Ducoco is in question:

We think it’s absurd that Vita Coco would have any ties with such a corrupt and disastrous company.

All in all, this could spell trouble for Vita Coco. We also question Vita Coco’s decision to stick such a disgrace to a company. Ducoco has been accused of violence and destroying the tribal people’s homes. This is a conflict of interest of Vita Coco, considering it is a Public Benefit Corporation.

2) Child labour involved in Vita Coco’s supply chain ?

While the above points detailed our investigation of Brazil, we will now comment on what we think of Vita Coco’s supply chain in the Philippines.

A large part of coconuts from the Phillippines come from a region called Mindanao. We have evidence from the US Department of Labour that shows that there is a lot of child labour schemes in Mindanao:

The DOL also published specifically about coconut supply chains relating to Child Labour.

Even though this data is not exactly conclusive, we shall leave it here merely as a data point which may or may not matter in the future.

3) Is this all a conflict of interest since Vita Coco is a Public Benefit Corporation?

Vita Coco has done a lot of promotion, citing its loyalty to agriculture and the environment. But do these recent claims even hold any value?

We are attaching the following letter to management:

Dear Vita Coco Management,

I am writing to express my grave concern and disappointment regarding Vita Coco's recent business dealings with a Brazilian company, Ducoco, accused of engaging in corrupt practices and causing severe harm to tribal communities in Brazil.

Ducoco has been involved in the Brazilian Marco Temporal Thesis, where corporations have chased indigenous people away from their homes to farm coconuts/soybeans, etc.
Ducoco is also related to various other frauds and corruptions highlighted by Operation Lava Jato.

Vita Coco is a Public Benefit Corporation, promising to protect natural resources, build thriving communities, and champion health and wellness.
You claim to help farmers in countries in your Supply Chain.
Then how is it possible that Vita Coco can have any ties with a company with values and mottos conflicting with yours?

We feel the need to hear a response from your management about this. Please issue a response regarding your involvement with Ducoco, especially since this involvement negates every claim and promotional stunt you have done so far about your ‘ESG Impact’

Regards,
Ragnarok Research

4) Characteristics of a Pump-and-Dump?

Vita Coco has about 56 Million shares outstanding, but Insiders have a shelf offering of about 26 Million. Most of these is by Verlinvest Beverages. Coco’s stock is still up because Insiders owns a large number of shares.
We strongly believe that Verlinvest will sell its shares, and COCO will lose most of its value:

There is a strong intention to cash out, according to us.

5) The Cashing out has already begun:

6) Supplier and Distributor problems are already manifesting:

7) The track record of Verlinvest Beverages:

Verlinvest Beverages own a huge stake in Vita Coco:

But, Verlinvest Beverages is also affiliated with another company:

Oatly is the only other publicly traded Beverage stock that Verlinvest has backed, and it turned out to be a massive scam.

First off, let us re-iterate that out of COCO’s 9 Board members, 4 of them are related to Verlinvest:

Aishetu Fatima Dozie: Elected by Verlinvest
Eric Melloul: Managing director of Verlinvest and Co-chairman of the Board at Oatly
John Leahy: Elected by Verlinvest
Kenneth Sadowsky: Advisor at Verlinvest

The influence of Verlinvest in Vita Coco is evident.
Oatly, heavily influenced by Verlinvest, it was so outrageous that they made a website detailing their own scams, PR failures, lawsuits, and more. They called it ‘Fck Oatly’
A small sample of the site:

Conclusion:

Ragnarok Research believes that Vita Coco, sooner or later, will crash down. A 100% increase from January is completely unwarranted, and we firmly think that this stock will crash. It currently boasts of a PE ratio of 54, while other Non-Alcoholic brands, such as Monster(PE: 35) , Dr. Pepper(PE: 24) are relatively unervalued.
By reading any of our posts, you agree to do your own due diligence before making any investment decisions. You agree that the authors of this publication are in no way responsible for your investment decisions, and are not liable for any of your possible investment losses, and you also agree to acknowledge that we are do not guarantee any accuracy in our research. You agree to also not proceed with any legal action against us.

The authors of this publication do not give any buy or sell recommendations and do not ensure any correctness to our claims or findings. Under no circumstances would you hold the authors liable for any investment losses. One should assume that any sentence or statement in our posts can be inaccurate and factually incorrect and should not influence anyone’s investing.
Sincerely,
Ragnarok Research

Duolingo Inc: An overvaluation unlike no other

Duolingo Inc.(DUOL) is an American education company mostly sepcialised in its language courses. Duolingo’s shares have pumped about 150% YTD, but we think this increase is extremely unwarranted:

1) We have found some weaknesses in Duolingo’s software, which can be detrimental to Duolingo’s revenue if enough users find out about it. Duolingo’s main revenue comes from subscriptions to its premium versions of its language learning app, but we have found vulnerabilities which enable users to access the most valuable perk of the paid version: the Unlimited heart. This showcases a lack of diligence in making a product.

2) We have found potential flaws with Duolingo’s business model and products, and we think that Duolingo’s shares will suffer due to our predicted headwinds on the stock. We also think that Duolingo’s reported metrics such as monthly active users(MAU) might be inflated.

3) We have uncovered both public and anonymous accounts of Duolingo utilising unethical business practices to increase revenue. This includes charging money after a premium account without actually granting the premium account, and in some cases, charging a user the full free after a free trial period ends, without informing them of deduction from their bank account, DESPITE promising to inform the user of this transaction. Duolingo has been known to cease all communications with the user post-transaction.

4) Duolingo’s IPO was backed by Durable Capital Partners LP, but its previous IPO sponsors have had a bad track record:
WRBY stock: -73.25% since IPO
YOU stock: -58% since IPO
Also, Duolingo’s net margins are positive right now mostly due to their interest income, which cannot be sustainable on the long-run according to us.

5) Duolingo has done a lot of promotion using the fact that they have incorporated AI into their Duolingo MAX platform. But, Duolingo MAX costs 30 USD while GPT-4 costs just 20 USD. As time goes on, we think users would switch to GPT-4(given they have released vocal conversations now). We think these LLMs like GPT-4 or Bard will kill Duolingo MAX’s demand.

6) Increased Insider sales. Durable Capital have already started to cash out.

Reasons why we think DUOL will suffer:

• We have found a weakness in DUOL’s software, which might be evidence of Duolingo’s low-quality products:
  According to our research, the primary motivation for users to upgrade from Duolingo’s free version is to be able to earn more than 5 ‘hearts’(where ‘hearts’ are ‘lives’ where a user cannot continue their Duolingo lesson if he/her makes more than five mistakes).
  However, there is an unintentional bug to override this restriction, and we think that this is due to DUOL’s lack of seriousness in making the product.
  Method: Just registering through a ‘teachers account’ and registering a null class with it:
  
  There is an apparent bug in Duolingo’s system where it is pretty easy to gain unlimited hearts.
  It involves swiftly logging in through a ‘Duolingo for schools page, entering a language to learn, and a ‘class name’, which could be anything of a user’s choosing.
  After this, the user is automatically granted unlimited hearts, but our research tells us that most Duolingo users don’t know about this ‘hack’ or ‘bug’.
  
  The lack of verification in Duolingo’s systems could be a method for losses of revenues and also a piece of evidence for the lack of quality in Duolingo’s products.
  

  
  We also have concerns about Duolingo’s safety since it suffered a data breach:

  

  Data about users were released publicly in the format:

  

  The API used to scrape and attain this dataset is still vulnerable, according to us, and it can be used by hackers and scammers for social engineering attacks, such as phishing emails, using the plethora of information disclosed by the breach.
  
  Even though Duolingo was alerted of this API vulnerability in January, no corrective action was taken until the actual release of the dataset. After this release, the only precaution was a rate limit, which is not too effective since some data can still be scraped.
  
  This dataset puts the 2.6 million users at risk of phishing attacks and credential stuffing.

• Duolingo’s potential inflated user metrics:
  Duolingo has reported in its most recent Q2 2023 filing that its MAU ‘Monthly Active Users’ were about 74 million.
  

  

  But, according to our research using third-party software(SemRush, etc.), we believe the number has come staggeringly low, and Duolingo will keep experiencing this dip in MAUs(Unique Visitors):

  

• Unethical business practices:
  We have spoken to users who have experienced events where they pay for a premium subscription, but they are not granted the perks even after payment. Even after numerous attempts to contact Duolingo, they do not answer and keep the money. Since we cannot disclose these interactions due to anonymity, we shall attach some of many similar experiences noted on TrustPilot:

  

  

  

  

  

• Durable Capital Partners’ failed track record:
  Stable Capital has backed a few IPOs, and here are their returns:

  

  
  Durable’s cluster selling of shares of Warby is a behaviour that we speculate will repeat with Duolingo as well:

  

  
  The same goes for its other bad IPO, YOU:

  

  

• Unsustainable net margins:
  An unhealthy part of Duolingo’s net margins increase is due to its increased interest income:

  

  
  It has grown from 669,000 USD to 7,543,000 USD YoY. This is a significant contributing factor to the increased net margins. This is due to the high-rate environment. That will eventually end up putting downward pressure on net margins.
  
  Also, we think it can suffer in the long term due to the increased Stock-Based compensation.
  A lot of its FCF is being eaten away due to this, and if this continues, coupled with the loss of interest income, it could be troublesome for the stock:

  

  

  
  

• The Death of Duolingo MAX:
  Duolingo has done a promotional scheme where they have boasted that they are one of the first corporations to incorporate GPT-4 into their platform. But is this really in the best interest of Duolingo? We do not think so.
  
  We have already demonstrated that there are methods to bypass Duolingo’s ‘hearts’ or ‘lives’ restriction. There are a ton of scripts on Git Hub to earn ‘lingots’ or ‘gems’ (Duolingo’s gamified currency). So, the only ‘appeal’ of Duolingo MAX is their AI incorporation, where there is a roleplay and ‘Exloain-my-answer’.
  
  First, we think the main inconsistency of MAX is that the business may not be sustainable. It costs 30 USD per month, while GPT-4, which has voice activation now, only costs 20 USD per month. The partnership with Duolingo has possibly provided a pipeline of language learning data to OpenAI, which will only be used to bolster GPT-4.
  In the coming months or years, we think users would much instead switch to GPT-4 for the roleplay feature.
  
  For instance, here is an example on Twitter where a user practices his Russian using GPT-4 as a language learning assistant:
  

  

  
  

  https://twitter.com/dmvaldman/status/1707881743892746381
  
  
  We believe LLMs’ increased prowess can kill Duolingo’s AI assistant demand.
  Something similar to Chegg’s 40% stock drop when they announced that ChatGPT is killing its business might happen to Duolingo:

  

  • Insider Sale of shares:

    

    
    As previously stated, Durable Cap will keep cashing out, providing some downside pressure on the stock.

  • The overvaluation:
    We have compared DUOL to other education companies on a Mkt.-Cap/Revenue basis, and here is what we’ve found:
    1) Chegg:
    Market cap: 984 Million USD
    Revenue(last quarter): 182 Million USD
    Ratio: 5.4 (Calculated in millions)
    
    2) Coursera:
    Market cap: 2.87 Billion USD (2870 Million USD)
    Revenue: 152 Million USD
    Ratio: 18.88
    
    3) UDMY:
    Market cap: 1.48 Billion USD(1480 Million USD)
    Revenue: 178.24 Million USD
    Ratio: 8.3
    
    And lastly, Duolingo:
    Market Cap: 7.28 Billion USD(7280 Million USD)
    Revenue: 126 Million USD
    Ratio: 57.7
    
    This shows the sheer overvaluation of Duolingo. The stock price implies revenues that Duolingo will never be able to achieve, owing to competition from LLMs and other factors.
    
    CONCLUSION:
    Ragnarok Research believes that Duolingo, sooner or later, will crash down. A 150% increase from January is entirely unwarranted, and we firmly think that this stock will hit. We highlighted the sheer overvaluation in this write-up.
    By reading any of our posts, you agree to do your due diligence before making any investment decisions. You agree that the authors of this publication are in no way responsible for your investment decisions and are not liable for any of your possible investment losses. You also agree to acknowledge that we do not guarantee any accuracy in our research. You agree to also not proceed with any legal action against us.
    
    The authors of this publication do not give any buy or sell recommendations and do not ensure any correctness to our claims or findings. Under no circumstances would you hold the authors liable for any investment losses. One should assume that any sentence or statement in our posts can be inaccurate and factually incorrect and should not influence anyone’s investing.
    Sincerely,
    Ragnarok Research

Innodata Inc: The biggest AI joke of the stock market

1) Innodata Inc.(INOD) is an American data engineering company advertising its involvement in AI to drive up the share price. Even though it claims to be in the AI space, we think that Innodata’s recent increase of 287% YTD is an atrocious pump-and-dump scheme facilitated by its false claims of being an AI company.

2) Innodata, a while ago, was just an ebook business. Its business involved turning paperback books into digital e-books by transcribing them manually and delivering them to e-book services:

They were essentially a business digitising documents. That’s it

3) So that begs the question, how did Innodata Inc., run by a 62-year-old executive at the tail end of his career, turn from an e-book data transcriber into a ‘cutting-edge AI’ platform?
We think it didn’t, and the market is unaware of this.
In multiple points in history, INOD has changed business themes, pump its stock price, and witness a huge crash.

4) Innodata’s revenue has been mostly flat throughout the ‘AI revolution’. There has been no growth in the business, and it does not actually play any part in the AI wave, but it sure is trying to be a part of it. Its DDS segment(Digital Data Solutions), which it advertises as its ‘AI division’, has its revenues in a decline:

Reasons why we think Innodata Inc. is an imposter among the AI companies and why we think it would fall to the Earth:

• INOD’s main ‘AI’ business is just basic data collection and annotation:
  Just like its e-book days, the only thing Innodata is involved in is merely helping with the data collection process and merely ‘correcting’ and ‘editing’ some of the potentially faulty data, and definitely not being involved with ‘Generative AI transformation’ as it claims to be:
  

  

  

  
  
  
  Even their ‘success stories’ page has no information about any AI involvement in their services:
  

  

  
  Under INOD’s ‘Applied AI’ section on their website, there is more evidence that INOD is just a data company associating itself with AI. The solutions they provide are hardly related to AI for the most part:
  

  

  
  
  Innodata’s website’s ‘AI chatbot’, which we think is an example of the ‘Conversational AI’ shown in the image above, is just composed of a few if-statements rather than actual Generative AI:
  

  

• Innodata is essentially just a Business Process Outsourcer, instead of using AI solutions as a company.
  Innodata has offices in numerous regions, with most of them concentrated in the Philippines, India, and Sri Lanka:
  

  

  
  
  However, we have evidence from numerous sources that Innodata, rather than having AI models to help with its business, outsources work to these regions, where engineers are sitting day and night transcribing data from different sources. We feel it is pathetic that Innodata is hoarding around as an AI company while its core operation is having its Asian employees just convert data from one format to another, and maybe some occasional annotation:
  

  

  

  
  Source: JobIndex, Innodata Phillippines
  
  Source: Google, Innodata Sri Lanka

• Insider Sales are up through the roof:
  Rapid insider sale of shares is one of the most bearish things a company could do. If Innodata is an AI company, why would the insiders sell their stake in their company at a point in time when AI development is expected to explode even more going forward? What’s concerning is even the CEO and CFO have been involved in this; it’s not just the company's directors.
  

  

• Innodata’s concerning money management:
  Innodata’s earnings have been depreciating at about -41% annually, while revenues have been increasing at about 7% annually. ROE sits at about -63%, ROA at -22.7% and ROCE at -35%. So, it is clear that Innodata’s money management is poor.

• Innodata has crafted an impressive story of its inclusion in the AI space, by constantly reminding investors of its ‘AI contracts’, but we think all of this is a hugely glorified piece of crap:
  

  

  

  

  

  
  
  
  It is pretty clear that Innodata has been driving up the share price by using these headlines with ‘AI’ as the buzzword, but it is pretty evident that Innodata is hugely overestimating its involvement with the Artificial Intelligence industry, just like they have done in the past

• Innodata has exhibited pump-and-dump-like behaviours in the past, by potentially misleading investors and glorifying themselves:
  From the image below, it is clear that Innodata has had a lot of bubbles in the past, where the share price rallied a huge amount and comes back crashing down:
  

  

  
  I used WayBack machine to capture how Innodata’s website looked during each of these bubbles:
  1) Bubble #1: 2001, INOD is an ‘Outsourcing partner’
  

  

  
  
  
  2) Bubble #2: 2005, INOD is into ‘Knowledge management and ‘Publishing, Media and Information Services;
  

  

  
  3) Bubble #3: 2008, INOD is into ‘Knowledge Process Outsourcing’
  

  

  
  
  4) Bubble #4: 2009, Same as previous
  
  5) Bubble #5: 2012: Innodata is into publishing.
  

  

  
  6) Bubble #6: 2021: INOD slowly morphs into an ‘AI company’:
  

  

• Innodata, an American company, is being audited by BDO India:
  

  

  
  This, for us, is a huge red flag. There are so many inconsistencies that could arise from this. We think it is very odd that Innodata, the self-proclaimed maker of ‘data for the world’s most valuable companies’, is being audited by a BDO office that is not even from the US.

• Innodata is trading at a huge overvaluation relative to its peers:
  Higher-than-perceived overvaluation.
  In 2023 Q1 Earning transcript, we can see the following interaction between an analyst and INOD’s CEO:
  

  

• This is a pathetic analysis since I’m guessing the analyst is comparing INOD to the big AI companies, like MSFT, NVDA, GOOGL, META, etc.
  
  But, when we compare INOD to its peers(Data engineering companies), we see a different picture:
  

  

• Assuming this ‘analyst’ is saying that INOD has a market cap 2x of annual revenue, let’s compare INOD with the names above(companies that ACTUALLY are in the same field as INOD):
  INOD mkt/Rev ratio: 4.64
  FiscalNote Mkt/Rev ratio: Slightly less than 3
  UIS crop: Mkt/Rev ratio: Annual Revenue more than the Market cap

• Ealixir Inc: Mkt/Rev ratio: Annual revenue more than the Market cap
  BBAI: Mkt/Rev ratio: 1.6

• III: Mkt/Rev ratio: Annual Revenue more than the Market cap
  CTLP: Mkt/Rev ratio: 2.6

• CTG: Mkt/Rev ratio: Annual Revenue more than the market cap

• Conclusion:
  Innodata is not an AI company. It is hardly a data company that just outsources its work to a bunch of people in Asia to do their ‘copy-paste’. It is astounding how such a crappy company as Innodata has managed to augment its involvement with Artificial Intelligence and drive its share price so high.
  Its insiders are dumping shares nonstop, and they certainly don’t seem too shy about it. This could be the most overvalued AI stock in the stock market, as it is up 287% YTD. The market has not yet realised that this is a joke of a company, and it is just trying to falsely ride the AI wave. Not one sane person would buy this stock if they knew of the insane overvaluation and its business background. Even after a collapse of about 50-60%, we would deem it overvalued. We have seen pump-and-dumps in this stock, and now it has completed its pump. The only thing left is for it to fall back to its ‘regular’ price of about 2-3 dollars per share.

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You might assume that I, personally, completely agree with those who classify technical analysis as astrology for traders... But do I?

Well, sure, I hate the ‘bullish flags’ or ‘bearish harami’ or whatever wacky candlestick patterns are out there.

But, the notions of trading with the moving average, support, and resistance do work, and there is evidence of it.

Trading greats like Stanley Druckenmiller, Paul Tudor Jones, and so on have employed this form of technical analysis while making a fortune, along with predicting market crashes pretty well.

Now, obviously, me, and even probably you, lack the braincells needed to do this, but I just may have found something that has worked in the past, and may work again in the future.

It is a form of technical analysis that feels stupid to use … and that is exactly why it just might work.

I have a metric that is quite good in predicting market declines or rallies in TLT (20+ Year Treasury Bond ETF)

TLT is an ETF(for newbies, a fund that behaves as a stock) that tracks long-term bond prices. It is pretty inversely correlated to the S&P 500, which is widely accepted as the benchmark for US Stocks:

Basically, when S&P goes up, TLT goes down … and vice versa.

One might think that if they know where one of the tickers would go, they can predict where the other would go. And that is pretty true … most of the time.

Remember, stocks can defy all the rules they are supposed to obey, whenever they want:

I had to post the scene from Wolf of Wall Street above

But, for simplicity, we shall assume that whenever TLT goes down/up, S&P HAS to go up/down.

So, let’s see the chart for TLT:

Going entirely based on technical analysis, you can see that the TLT is set for a rebound, and is set to increase.

But, is there a method that would have allowed us to predict the other increases in the past, when it was not near the white line?

Probably.

Have I found it ?

Probably not.

But here is what I think:

Basically, a hard-and-fast rule about bonds is that when Bond Yields increase, Bond prices decrease, and vice versa.

TLT measures Bond prices(roughly)

So, if TLT goes down, Bond yields go up.

There is an Index that tracks the Bond yields as well, known as TNX:

You can see that they are VERY inversely correlated.

The next part is a little wacky.

I don’t know which of my stupid-ass brain cells thought of this, but I decided to see if there is something interesting in the slope(derivatives … not the financial kind, but the calculus kind) of the 25-day moving average of the  ratio between TLT and TNX.

Yeah … very random, but when I plotted it:

SHITTTT

Honestly, it was very surprising to me that I found something that looks like a pattern.

The yellow line is not TNX/TLT for each week’s close, but instead the slope of 25-day moving average of the ratio between TNX and TLT.

The interesting thing is … whenever the yellow line enters the top channel, it lingers a bit, and starts descending to the bottom channel.

During this descent, almost always, you can see a pretty big pump in TLT.

And, whenever the yellow line enters the bottom channel, it stays there for a while, and when it starts ascending to the top channel, we can see that the TLT enters a decline.




This is what I meant when I said that this is an unconventional method of technical analysis … We are literally applying principles of support and resistance to a fuking derivative (well, slope of a curved line).

Betting on an increase in TLT is a high-conviction trade because:
1) Price is near a support level, and I think we are due for a bounce
2) Yellow line is in the top channel, and I would hit the buy order for TLT the moment the Yellow line starts descending and leaves the top channel.


I also have a low conviction bearish case on S&P:

I did the same thing as above, but here, the yellow line is the slope of the 25 day moving average of the ratio between TLT and SPY.

We can observe the same exact thing … A Market declines whenever the yellow line is descending, and a rally when the yellow line is ascending.

But, at the moment, the Yellow line is a bit too much higher than the channel, but we can see a mini resistance level formed from 2021 to 2023.

If I were to short the S&P:
1) I would sell when the Yellow line is in a descent, maybe if it dips below the top blue line of the upper channel.
2) I would also short the S&P because I wrote about a high-conviction buy-case of TLT, and we know that TLT and SPY(S&P) are inversely correlated.

I hope to do more with this slope technical analysis thing.

I have plans for upcoming writeups using the same method for some other markets.

A few inspirations that made me think about TLT, TNX, and SPY: