FormerXBC Inc XEBEQ

Book value and goodwill

[Ciao]

Explained a few times already. Goodwill is mainly from the HyGear acquisition. Purchased assets are impaired if they will not bring future revenues.  HyGear was purchased cheap (9X 2019 rev of $18M).

If the current P/S multiple of 20 (that is even after the one year cleantech market correction) for hydrogen generator companies is applied to HyGear's estimate 2021 rev of $22M  that values HyGear at about $440M, much more than XBC's current market cap of $260M. Even a 25% P/S multiple discount at 15X puts HyGear's value at $330M, still > $260M.

This is an overstretched valuation short.

• A "Valuation Short" is a short idea based solely on valuation (fundamentals). This is presumably a "bad" idea and one of the quickest ways of loosing all your money.

• A "Structural Short" is said of shorting a company with a mature business model in decline, or shorting a stock that is becoming obsolete or significantly less competitive due to some major changes in the industry.

A good example of a structural short is shorting a "newspaper" stock. The case of the newspaper industry is a good illustration of structural decline: due to the proliferation of online news sources, expensive news priting has become obsolete and has lost its competitive advantage.
 

So, here is my interpretation of the quote "First lesson: Valuation shorts are pretty difficult. Look for structural shorts instead.":

• When relying on fundamentals alone to support a "short" idea, one can be misled. For example, some would rush to short a stock based on a small earnings miss. This wouldn't be a good idea unless supported by a catalyst. Earnings miss, slower growth or low margins can easily revert. For example, if a company is hitting a rough patch due to mismanagement, the situation could quickly reverse back with a change of management. Should you have shorted that stock based on fundamentals alone, you would certainly be in trouble. However, if the poor fundamentals were supported by the fact that the company is facing structural disadvantages or loosing competitive edge, then your short could end up being profitable.

The've corrected the major short comings on margins due to the BGX systems with standardization and earnings misses will not depend on what analysts guide as those responsible for these issues are no longer in a position to do so (either by depatures taken already, or to be taken).

[Ciao]

Correction on typo, Should read as follows; The've corrected the major short comings on margins due to the BGX systems with standardization and earnings misses will now depend on what analysts guide as those responsible for these issues are no longer in a position to do so (either by depatures taken already, or to be taken).

[ferret_ca]

incase you hadn't noticed,  since int rates started raising valuation metrics ( like price x sales for 1) for tech companies have imploded , even worse for small caps, valuations of private tech companies have cratered. so your suppositions on valuations of 22 x sales etc are totally ridiculous imho, so far out to lunch there is no lunch. also your belief that what they paid for hygear

[Ciao]

No supposition, seems likey you are just projecting.  Paradigm's Jan. 25, 2022 report on XBC shows hydrogen generator companies p. 3) at a 22X EV/S (used as an approximation to P/S as diff is net debt) based on 2021 estimates and after the cleantech correction. The purchase price and rev for HyGear is public info. From the XBC prospectus in Dec. 2020, where HyGear was purchased for