BUD (ASX) Ann: Acquisition of LIFX and Share Placement

Originally posted by Bubbles Mcgee: ↑

Looking through the LIFX financials at the end of the announcement I am concerned that we are buying a company that appears to be trading insolvent. According to the statements as at 31/12/18 LIFX has 21.5mill in assets and 26m in CURRENT liabilities. I am no expert, however when your assets can not cover your at call liabilities then you are basically insolvent. What am i missing here?

Furthermore that majority of the debt 'eastfield debt- 23.2mill' appears to be from the manufacturer as explained in the announcement. This is concerned for 2 reasons because Suppliers have a huge incentive to hand out credit to customers to keep them in the game. Once they factor in their margin, it sometimes makes sense to extend credit where no one else will Their credit rating capabilities are usually quite poor on top of that.

It looks like LIFX has been using its supplier to fund it's growth.

I am pretty worried as a BUD holder as to why we are paying 51mill USD for such a business. The story is great and i see the potential, however considered what has gone on at BUD over the last 12 months i don't really know how to take this news. I hold a ton of shares under 6c and was considering buying more under 9c once i digested this information. Can someone with a better insight into the numbers provide their point of view on the LIFX financials as currently reported, specifically around the debt they have on the books.

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all that is why I said fair value appears to be around 5c. its precisely why the cornerstone LIFX investor wanted an exit.

but thats the beauty of stock market - if you can get enough people to believe in a different forward view and get it funded then you can change that over time

its a triple down russian doll bet on market wanting to lift multiples on microcap IoT stories before business runs out of cash runway

thats why i said debt was surprising - most management teams would regard that as an extremely high risk approach. imagine if BUD had used debt to fund the Ohm rollout - it would now be starting to implode under servicing costs.

thats the risk they will have from here. personally i think theyll end up having to do another equity round - its tough to see even Silicon Valley Bank funding this because of the maturity curve in both businesses