"stop wasting money on buy backs..... people will just keep...

"stop wasting money on buy backs.....
people will just keep dumping....
we need expansion.....
cfd... sports gaming... topstep.....
anything.... that generate $$$$$"

Couldn't disagree more with that sentiment.

It is now unambiguously clear that this company is really little more than a child of the Covid era, when the cost of capital went to almost zero at the same time everyone was sitting at home, bored.

Moreover, it is demonstrably clear today that the business has no enduring commercial moat off which it is able to grow. I mean, how many millions of advertising and marketing dollars have been dusted over the past three years in trying to grow?

It's board and management have not earned the right to deploy shareholder funds into new ventures, which leaves the best available strategic option to put the business into run-off mode, i.e., shrink the overheads down to the bare bones essential and harvest the resulting surplus capital that results and return that capital to the owners of the business.

I strongly suspect that's the exhortation the company's grown-up shareholders [*] have been making to the board and to management in recent times, and this buy back announcement is probably in response to that.

There's a legion of potential owners of the company, this little chipmunk included, who see the intrinsic value but won't touch the stock, for fear that the value is going to continued to be frittered away; but who would happily become shareholders if the Board was clear in pursuing a path of value harvesting.

To that end the executive script is simple:

1.) With the wasteful advertising spend having been slashed, now cut the Staff and Admin expense to just stay-in-business and systems maintenance roles (which should surely end up at no more than $10m pa; c.f. current run-rate of $16m pa)

2.) This would leave total expenses at around $21m pa (product costs and advertising expenses are collectively around $11m pa)

3.) With $30m pa in Revenue, that would leave EBITDA of $9.0m (same as EBIT effectively, as the company does not wear meaningful capital charge)

4.) With $30m of Accumulated Losses, the company won't be paying tax for many years, so all of that $9m of EBIT will become surplus capital.

5.) Surplus capital equivalent to 35% of the $26m EV of the company, i.e., an EV/EBIT multiple of less than 3.0 times.

6.) Return the surplus to the owners of the business.

As can be seen, the path to restoring at least some of the mountain of shareholder value that has been destroyed (they'll never recover all of it), is really very simple and straightforward.


[*] Those who see the business stalemate, under continued "growth" strategy of the past three years, being interminable.

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