Hi all,
Just want to discuss this company coming out of the Cap raise and long suspension. I personally believe the current system of throwing turds back and forward yelling downramper etc isn't going to get anybody anywhere.
For disclosure, I have sold after losing faith in management and the product after averaging down on this falling knife the last 6 months, please don't call me a downramper I have been nothing but supportive of the company the last 6+ months but definitely see some writing on the wall.
The product
I initially bought into BUD after a friend speaking highly of LIFX globes and seeing the trade partnerships rolling in and the seemingly insatiable demand for LIFX products.
Initially you want to analyse the product and as such I have since bought the following products:
- 1 dawn to dusk 4 pack
- 1 Colour globe
- 2-3 white globes
since then 2 globes in 2 different areas have stopped working and I can't be bothered rebooting/checking if they are faulty(I have chandelier type things with 3-5 bulbs in one where I use 2-3 in each so one going out isn't leaving me with no light). I honestly don't use Google home and Alexa as they personally are an invasion of privacy but toyed with Google home them on my phone.
My Verdict:
-My GF's verdict is that they are neat changing colour and being able to turn them off in bed
-My view is that in short "smart" bulbs are not the revolutionary things they are hyped up to be here, they are dumb, lose connection and frankly are annoying having to use the app if the GF has turned them off in the app, flicking them on the switch doesn't turn them on, even if they are meant to. I will outfit my home the second they can sense someone entering and leaving the room and turn on and off required.Things I Like about the company:
1) -Products and innovation, we cannot deny there is a demand for the products, although trivial and novel for me only a % of the market needs to like it. Switch with its seeming high margins and strong use case (imagine getting one of these into any new build) to beams and strips for gamers with too much money and time.
2) -Don Hicks
3) -Apparently they have gotten rid of all loss leading sales.
4) - Apparently new manufacturers are coming on line which should hopefully diversify manufacturing and reduce the risk to the parasitic relationship at Eastfield's.
Things I hate about the company:1) I
HATE that the last two times capital has been raised it has been coming out of a long ass trading halt allowing sophisticated owners (at a frustrating discount) to get their shares allocated and then dump for some arbitrage. this often doesn't happen on the market as owners usually can sell prior to the capital raise if it is a bad deal for existing shareholders.
06/11/2020 suspended from trading 09/11/2020 trading halt SP $0.056 > 11/11/2020 raise capital at 14% discount at $0.048 share price closed at $0.056. We then had to suffer in share price as over 270,000,000 shares were dumped on market for profit.
Same would have happened if the market wasn't keen to get out the door. Retail didn't even get a opportunity to participate in a seemingly upwards momentum last cap raise but are able to after they royally messed up this capital raise.
2)I
HATE these seeming "insiders" like Holdtight and dreadpirateroberts (apparent relative of DM) who come in with unannounced or unsubstantiated information who say something and low and behold it mostly comes true. For a company that is approximately 66% general public ownership even if holdtight was getting his information from insto channels time and time again this company shows contempt for retail investors.
@Holdtight still enjoy your analysis from a level headed approach, just suspicious of the source especially with some information I would deem as either insider or information the board should disclose.
Areas of concern or signs of mismanagement? We know there is currently a chip shortage and BUD was caught with its pants down and lost being able to generate any income as they had no chips so no new product as well as the disastrous accounting error that DM being sky high didn't question, mistakes do happen but still not a good look.
1) BUD's response was to ration these chips spreading them over time and to increase salaries (technically a reduction in a reduction of pay, see COVID 19 update in 27/04/2021 update). I personally think this shows a lack of making the hard decisions of not standing down staff, I understand you need to maintain key personnel and firing people is never to be taken lightly but a healthy company hires more people long term then a sick company. This is especially concerning as salary easily takes up 1/3 to 1/4 of the revenue made with costs of goods and admin costs being another 80% of revenue (numbers from last half yearly as last quarterly is unusable). I also am uncertain if any numbers until the next 4C can be trusted. My gut says the company has some employee bloat.
2) I am unsure if BUD will be able to manufacture enough product to outweigh the high fixed costs and costs of goods and administration due to needing to front up cash upfront for products and being limited there. If they had no limit to debt (they never will) I see a green future as they can manufacture as many bulbs as demand requires but right now I do not see them exceeding the costs with their level of manufacturing capability and debt ($4m of interest paid in last half after $13m was raised in November 2020).
We shall have to see what the next 4C says in terms of debt and capital raised to see if they overcome this.
3) The going concern section is never straight forward or glowing as one day they won't be able to raise capital with their track record.
4) I am cautious of inflation hitting BUD on the components whether this is transitory or long term either of them hurt BUD's bottom line.
My major lesson learnt.
I naively thought that if the product is amazing even a monkey could sell it and the company is likely to be profitable overtime. BUD has taught me that governance is one of the most important factors in a company.
Overall I may rebuy back depending on the capital raise and next 4C but growth and "multibags" are not as straight forward and guaranteed as people make it out considering high level or debt and insane dilution.
Keen to discuss your thoughts and anything I missed, I will be adding parts I missed as I remember them.
