Reflecting on my mistakes When something is too good to be true, you need to follow your gut instincts. I will highlight the mistakes I made in the decision to purchase shares in this company. I hope this post will help others not make a similar error in judgement.
1) Dont believe management when they tell you they have a product that's going to be disruptive in the marketplace. This has an all too familiar playbook such as when the Ceo of Theranos Elizabeth Holmes telling shareholders that their technology is going to change the world. That's complete B.S.
Illumin is far from taking over the world of advertising. After 2 years of "pumping" Illumin, it has only $1.2 million in self serve revenue (Q3) which is a disappointment.
2) Don't invest in a company that's cheaper than others in the industry when the industry as a whole was overvalued to begin with. I think this point needs emphasis. For instance, if Acuityads has a 25 P/E ratio and Trade Desk has a 100 times P/E ratio then that doesn't make Acuityads a buy when you can pick up an oil stock for a 7 times P/E ratio. It's clear who the winner is going to be. It's all about absolute valuation that matters. The adtech industry was in the biggest bubble that I can remember. You can toss relative valuation in the garbage.
3) Dont pay any attention to management guidance.
Often times, a Ceo is going to pump up his stock to make it appear better than it is. I would suggest investors pay attention to the financial statements and with an emphasis on the "audited" Q4 numbers. Take managements guidance with a grain of salt. The Ceo Tal Hayek has lied on so many occasions.
4) The past Cfo cashed out completely and that should have been a red flag in 2020 and all the reason to have cashed out with them. Something didn't add up. They apparently had the best product on the market but yet nobody was buying shares.
5) Invest in companies that have a proven business model. The mistake I made is that I put too much faith towards a product that had not been tested in the market. It was clear to me they were going to discontinue their legacy business but the new business model had not been proven yet. Looking back, I should have waited to see results on Illumin and now after 2 years I can say it's been a disappointment.
6) Management credibility.
This one is important. I cannot tell you how many times Tal Hayek has mislead investors. Invest in companies that under promise and over deliver.
lie # 1- 30% of lost revenue was due to covid. Ok, if that's true, then why are year to date revenue numbers lower y/y?. They should be higher with an opening economy. This tells me those clients did not come back to Acuityads or the 30% decline in revenue was never true to begin with.
lie # 2- On October 2020, Tal Hayek says the sales lead time for Illumin was 6-9 months. Ok, so howecome Q3 2021 was nothing spectacular?
lie #3 - this one should be more familiar. Do you remember when Tal Hayek promised 20-25% revenue growth for the year? Well it turns out, they are down 5% in revenue compared to last year. In all likelihood they will show a negative revenue growth for the year.
Management has lost all credibility and if one is investing in this company, treat it like a cigar butt. It might have one last puff before the nail in the coffin.