RE:The Overheadbandit69 wrote: What 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.
Moving fast. Let's recap.
- they announced funding today via a 6.25MM loan at 10% (not bad for such a high risk so maybe there is lender confidence there??) so they have some liquidity...for now. check
- part of the loan (unsure of amount) is coming from a current director, not sure who but I see this as a positive. They're putting their own money where their mouth is so to speak and this inspires some confidence for me. They'd have more detailed access to what is happening than I do. check
- as I said yesterday I thought things would happen fast. cash infusion...check. whew
- the loan comes with covenants of course and warrants will be issued under certain conditions. What I find interesting in this is that the warrants are specifically noting "based on Hydrogreen shares" what are Hydrogreen shares? I think this tells me the Cubic modules are on the way out and maybe this will become Hydrogreen instead of Cubicfarms. If this is the case, do they have a buyer already? could it be NTE Discovery Park? the same ones that bought units earlier this year and were going to manufacture them too? hmmm. Seems to be a fit. Let's see.
- I looked at the website and the hiring for the Canada Cubic side is nil. Still hiring for the US (Hydrogreen) though so I think it is clear the direction they are going. I wonder if they laid off most of the people on the Cubic side.
Overall, I like the new and more focused focus instead of the numerous other focuses that we saw with the Cubic side. I think they were trying to act as a franchisor. Good idea to try to provide a turnkey product right down to buyers of product and branding with Allways Local but I think before franchising ( I am not saying they were but it definitely followed that template and maybe the were going to receive royalties for via Allways Local) there needs to be a foundation / brand for it first.
Other than some warrants at some point in time, it doesn't appear like dilution is going to happen...not yet anyway so kudos for that. If they were able to receive a loan in today's rising interest volatile world I see this as a good sign. Maybe a consolidation will occur if (when?) they rebrand under Hydrogreen? maybe not. While I am against debt and dilution in general, obtaining some liquidity is a good thing. They also manufacture Hydrogreen in the US and I see this as a big plus as we can see clearly how offshoring was a huge risk. I wrote about onshoring long ago and, while they found a manufacturer for their modules, Canada is just too expensive especially when you're talking stainless steel. Not just for metals but for labor and expensive stainless welding. They've mentioned "more profitable" business focus so maybe onshoring hit the economics of the modules. Not including land costs, permitting, and multiple levels of bureaucracy in Canada to wade through to get a project to a commissioning stage.
Hydrogreen likely needs feed centers selling feed to ranchers. Corps with deep pockets that can do it instead of selling units to ranchers. Maybe they're having difficulties financing.
Let's see how it unfolds but maybe, just maybe, I am starting to become interested in getting my feet wet.