I tuned into the Investor Presentation as I was hoping that it would provide the market with some much needed clarity and might provide the impetus for a change in trend.
Overall assessment: missed opportunity and initial price catalysts remain 6+ months away. Any potential major game related revenue uplift likely to be 12-24 months away.
The GoodMetal Genesis video looks AAA quality. Whilst this has been the known ambition for a while, everybody should recognise the importance of not simply relying on management spin. The video is solid evidence that ICI are developing a quality game. As I've maintained from the outset, these types of games take 3+ years to develop, which is why it was virtually impossible for the company to launch an early version in 2022.
My paraphrased notes from a previous update from Kin: "AAA metaverse game Metal Genesis, which is currently still under development but progressing rapidly with a playable demo due to be ready in Q4 2022."
I also note the contradictions in the recent slides: "Continue to build on game mode - near alpha playable ... Building In-game and Marketing Cinematic Assets" and "Delaying soft-launch to aim for better Web3conditions".
An early version of the game is still in development, hence it is not ready to launch even if we were in a raging bull market! Web3 conditions are irrelevant when projects have fallen behind schedule. It is for these reasons that the market lacks trust in ICI's timelines. MG is likely still 6-12 months away from beginning to generate revenue from NFT/land and token sales, and material game play related revenue 12-24 months away. We know this because active social media marketing is yet to commence. Launching an alpha version before the end of this year seems viable, but relying on better Web3 conditions introduces more uncertainty and risk to this timeline.
Star Life - game development only commenced in Feb 23. First alpha planned before end of year would therefore seem optimistic. Hopefully they've learnt their lessons about overpromising and underdelivering. Unlikely to generate material revenue this FY, but could be a price catalyst in 2024 (60% ownership for ICI).
Engineers - Pleasing that this project is now being publicly marketed. Disappointing that they didn't provide more info on their utility and whether or not they relate to any ICI games. 6 months to launch appears realistic from my perspective as it takes time (and marketing budget) to raise awareness and build a community. All the important financial details, such as allocation via private sale (will Animoca take a chunk?), pre/public sale prices, creator royalties and revenue share model, remain absent at this stage. Not having a publisher confirmed at this stage is a concern and might well be used as an excuse if there are any project delays. For example, if crypto sentiment deteriorates again, will the project be "held back"? (see below).
There seems to be evidence that ICI have at least attempted to incorporate feedback from holders. 120 employees outside of LSS is substantial. Its time for these guys to start generating some decent revenue. Good work from Bakerrr and co.
The BadGamebox - lacklustre "global launch" therefore unable to present any measures of success. No clarity on the project business model - was this a simple WFH project or do ICI retain a stake?
AnotherVerse/Quantum Ark/CryptantCrab - not surprising, but poor form not to have a slide on each of these covering the basics given that they've only name checked 6 games. Kin and co still don't get that it's their job to communicate the significance of the games and IP that they are developing, and then keep the market appraised of progress and any changes in strategy. For example, are ICI investing $1m into the development of these games or closer to $10m? Are any going to be AAA quality? What stage of development are they at? Why should the market sit up and take note of these games? Seems reasonable to assume that these 3 games are not near term deliverables and won't contribute to revenue in FY23. 50% of the games that they are developing, the market has absolutely no information about. Didn't Kin previously refer to 10-12 games being developed? What's happened to the rest?
Froyo - If NFT trade volume is 84% higher q-o-q, then why hasn't Misfits artwork been handed over? $4m could fund another acquisition or be used to buy-back shares. The value of Froyo as "strategic publishing partner" needs to be called into question. The slides also contradict the need for Froyo, as they state that ICI has full stack A-Z capabilities including publishing and community building.
It would be much better to have Immutable as the publishing partner, as they are the real deal, so pleasing to see the tie-up with Kyo. Isn't Storms meant to also provide extensive game publishing expertise? How much did they pay for Storms ($16m?) - seems a poor investment based on what they've delivered thus far, which is also compounded by their operating losses.
Share price, SBB and capital allocation - Cash and equivalents of $18.2m might appear high at first glance, but once you factor in debt and liabilities, then the company has circa $12m; with the bulk of this required for general working capital and contingencies. Millions of dollars will also be required for marketing and community building in the latter part of this year.
Management basically mistimed the market when they were buying back shares above the 11.5c cap raise price. They might have believed buying at an average price of 12c was good value (as did many holders when the metaverse was still being hyped), but they have clearly been proved wrong. They simply don't have the firepower to commit millions more $$$ to the SBB, regardless of how low the price goes. Whilst LSS is doing a great job at subsidising the other arms of ICI, the share price will only rise in a sustainable manner if ICI can launch their own games/IP that users like. ICI remain unproven in this regard.
Kin revealed that if the share price was higher, then they'd have likely continued to acquire companies through scrip, which makes perfect sense. However, this strategy is unviable when the share price is down 60% from the last capital raise. Crazy might harp on about the share price being irrelevant, but it is obvious that the share price can help or hinder business growth. As things stand, the share price is hindering ICI's acquisitive growth strategy. Timing is everything. Plenty of bargains are available in a bear market, but ICI aren't currently in a position to exploit them.
The UglyThe live presentation was far too disjointed. Perhaps fortunate that only 50 investors tuned in as the updates from Kin and Shn Juay were underwhelming. The former really struggles to articulate the business strengths and opportunities in a compelling manner and the latter was reading from a script. Neither project the sort of confidence, vision and assurance that appeals to investors.
Imagine if 500 potential investors had tuned in for this; do you honestly think that they'd invest based on the presentation?
The Power Point slides will get viewed by a wider audience, but it doesn't do enough to excite the market and some of the wording is extremely amateurish. The last bullet point states: "When the Web3 market turns and scale up, we will emerge winner". This reads like the type of nonsense posted on these threads! Crazy - did you have a hand in preparing these slides?
ICI are basically admitting that their success is contingent on crypto sentiment and market conditions (surely a great game and IP will prosper over the longterm regardless of speculative activity?).
They've accentuated the risk for investors by delaying launches until market conditions improve. Bear markets can and typically do last several years! This is something that Kin has failed to recognise. He has basically told the market not to invest in the company until Web3 conditions improve. If we are still in a bear market by this time next year, does this mean that all launches will remain on hold? Very strange considering that the rest of Web3 has continued to deliver projects throughout the bear market.
Based on the live presentation and slides, I see no compelling reason why a potential investor would jump in at this time. 6 months before Engineers drops (assuming they finally meet a deadline) and longer for any alpha game releases. The end of the year could potentially be extremely exciting (but didn't holders all believe the same thing about 2022?), but this is reliant on 1) ICI delivering against their milestones which they have never done 2) the ability of untested partners, namely Froyo delivering, and 3) crypto conditions being bullish.
2 out of 3 fall outside of ICI's control, which adds a lot of risk. The litmus test, for me, will be the success of Metal Genesis (and/or any other AAA games), but it'll likely be another 24+ months before this starts to become clear. How each of the 2 NFT projects perform, will also be a useful indicator of whether ICI/Froyo can deliver, but it's extremely unlikely that either project will be transformative for the company.
Will be interesting to see how the stock price holds up against the inevitable tax loss selling over the next couple of months.
