MicroVision (NASDAQ:MVIS), a company with some patents on Lidar sensing and micro-display technology, now has a $2.48 billion market value. Unfortunately, MVIS stock is not worth anything near that value. Somehow, the company has convinced a broker-dealer to raise up to $50 million for them at this value.
On Feb. 16, the company released an 8-K filing with the SEC indicating that revenue during 2020 was between $3 and $3.2 million. That puts MVIS stock on a price-to-sales ratio of 826 times. This is beyond ridiculous.
Moreover, the company said it had raised $13 million recently. This was on top of the $16.9 million it had at the end of the year. So, before cash burn during Q1 the company presently has $29.9 million.
Assuming it burnt through $3 or $4 million during Q1 2021, its net cash balance will likely be about $26 million at the end of this quarter. So if the company somehow raises $50 million more, it might have $76 million or so.
I believe it might be a real question, though, whether the company can really raise the $50 million. This is despite the $2.48 billion market cap that the company presently has.
It also seems comical that on Dec. 22 short-seller Hindenburg Research made a series of Tweets about MVIS stock that later proved ill-timed. The comments they made pointed out that the stock seemed overvalued given its lack of real technology or proven patents. They called it a “corporate husk.”
At the time MVIS stock was at $9.27 per share. Then the stock skyrocketed to as high as $23.72 in the middle of February. I feel sorry for anyone who might have taken Hindenburg’s lead and tried to short the stock.
However, since then MVIS has fallen to $14.87 as of the end of February. I suspect that the stock will keep on dropping. It may be that the stock will then fall below the level where it was at when Hindenburg Research first came out with its comments on the company.
The reason is obvious. The $2.48 billion market valuation the company presently has seems way too high. This is despite the update that the company provided on Feb. 10. It said that its long-range Lidar sensors might meet its April milestone of completing A-Samples or functional prototypes.
The problem is this does not translate into any kind of solid forecast of revenue. It is impossible to know what the company can do with its projected “functional types.” The company has not announced any forward or even any potential contracts with OEMs.
Even if you were tempted to consider investing in MVIS stock at this point, you know that you would most likely be gambling. There is nothing solid on which to base any reasonable estimate of its existing market capitalization.
Moreover, there are no Wall Street or even off-Wall Street type brokerage research reports on the stock. Craig-Hallum is doing the $50 million at-the-market (ATM) equity capital raise.
They must have some information on the company’s prospects that no one else does. In that case, I don’t see how they can use that non-public information to induce anyone to buy $50 million worth of its shares.
This is a situation where you sort of have to put together probability estimates based on best information and judgment. Then you would constantly update them.
For example, let’s assume that there is at least a 60% probability that the stock will fall another 50%. There is probably only a 20% chance it will rise 50%. And that leaves 20% that it will trade around the same price as today.
Therefore, here is the expected return (ER). In the first scenario, the ER is 60% times -50%, or negative 30%. In the second scenario, the ER is 20% times +50%. That equates to an ER of +10%. In the third probability scenario, the stock is flat, so a 0% ER.
Therefore the total expected return from all these scenarios is -30% plus +10% plus 0%, or -20%. In other words, the speculative investor is likely to lose at least 20%. The target price is 80% of $14.57, as of Feb. 26, or $11.66 per share. Therefore, stay away from MVIS stock.
On the date of publication, Mark R. Hake did not hold a long or short position in any of the securities in this article.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
The post MicroVision Is Not Worth Anywhere Near Its $2.48 Billion Market Value appeared first on InvestorPlace.
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