NAUV-Your thoughts now ?, page-2

Thanks for the question.

Few thoughts

1) the due diligence done on the practices was poor and they won’t just recover. Management is alarmingly inaccurate in its predictions of growth and near term revenue. Blindnfreddy knows the December quarter is supposed to be busiest and the Jan-March quater is by far the quietest in dental. Yet, they made bold predictions about revenue growth despite the seasonal reality. It’s nkt that you can’t trust management, it’s gotten to a point where I think, they just don’t know.

2) many dentists that work for them are thinking of bailing or have bailed. Some principles that were in the profit share arrangement have also bailed. Dentists can earn 200-300k a year and being out of work or not getting paid is a huge opportunity cost. Many dentists have been spooked by the share price drop and the lack of liquidity and are looking elsewhere. It won’t be easy to replace these people.

3) A purchase of shares now is binary. I 100% believe the assets of Smiles, either sold separately or as part of one big takeover are worth more than the current market cap. I also believe the market is efficient. This is priced correctly. The difference is that they have hardly any cash and I don’t think they will get financing from any lenders. If the become insolvent and the bank moves in, shareholders lose everything. A real possibility that will happen.

4) in the long term, this company has no future. The quality of practices they bought are that bad, and corporate overhead that high, that they will not be profitable imho. Also recruitment of staff and dentists isn’t gonna be easy for them now. Experienced dentists are becoming harder to come by and if given a choice, they won’t work for smiles.

happy to answer any specific questions.