The OverheadWhat a difference a month makes. Wow. Can you say mess?
August 15th earnings were released with an announcement of downsizing. It is apparent that was not enough and more was needed. I think reality of a dwindling cash pile and, a rising interest rate environment, limited future financings and that realization finally lit a fire under someone's a.r.s.e somewhere but I think at this point there would not have been any choice but to downsize...alot. I've been writing about this huge overhead for over a year and kept asking why the ongoing relentless hiring? I couldn't follow the org chart if I tried and I have worked for some big corps over the years with more legible charts. Where were the sales? more important, where was the cash to support it all? I think that was answered today with the announcement of about a 50% staffing reduction. There wasn't enough.
The Fresh Hub cancellation is also a major blow to the business no doubt about it. I did not expect the Fresh Hub to be cancelled but I did write in past about the potential for projects to be cancelled because they state in every fin release their cancellation policy that deposits could be refunded depending on manufacturing and shipping status. It doesn't look like lettuce will sustain the business model though whatever it was. As time wore on, I kept wondering what exactly is their business model? It seemed like far too many irons in the fire and that costs money. I also get marketing costs are a part of doing business but it sure seemed like the Amplified "launch" that was done last November? was a flop and that alone was likely not cheap. It also seemed bold to state they were responsible for launching a new tech sector like "Tesla" and "others" did.
If a dummy like me could see this trainwreck coming, then why couldn't those who were being paid using shareholder dollars see it? where was the board? It was so obvious. I don't know what the cash position is but I suspect it'd be ugly right now. We will see if they can remain solvent but I have a hunch they will squeak through it all.
I don't know what the future holds but I can guess a little. I think the share price will continue to languish so more pain to come. I also suspect there will be a consolidation of the float and a subsequent financing to re-capitalize. Just a hunch and based on past experience in markets where I've seen companies run out of cash and the same sort of procedure was initiated. Dilute dilute dilute, consolidate, then comes more financings. I also think the lettuce part of the business will be sold and it will just be Hydrogreen going forward at some point. Whatever is going to occur, I think it's going to happen very quickly and soon.
I will continue watching from the sidelines and see what will transpire and then I might take a punt at some point. Where cash is going to come from is my question. Such great tech but it is my view there was far too much Kool Aid consumption and articles being written and, somehow, a refusal to acknowledge there was a problem in their business model. Or, a lack of the ability to see it.
As a side thought, I wonder if there could be wrongful hiring suits as a result of this debacle? What if this talent they procured left other jobs with promises of unicorns prancing about and butterflies flying around people's heads only to now be laid off at CUB? I don't know enough labor law but I wonder if this might pop up. Lawsuits have to be disclosed in the notes to financials so I will keep my eyes open for that.
All in my opinion.