116 – Learning from mistakes you narrowly avoid $MCLDF
Mental Models discussed in this podcast:
Confirmation Bias
Skin in the Game
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Show Outline
mCloud Technologies – $MCLDF
SaaS company
Trading at just 1x expected revenue
Energy efficiency (Oil and Gas Plant efficiency)
Green Energy (Wind Turbines, HVAC efficiency)
Uses AI
Problems:
Cash flow negative (Presumably in the name of growth)
Regular ongoing stock issuance and dilution
Both shares and warrants
“An assumption that this is the last time.”
Very promotional management (with skin-in-the-game?!?)
“Uplisting to the NASDAQ” talk
A lot of examples of SaaS names going from 1-2x revenue while on the Canadian TSX market to 10x+ revenue on the NASDAQ in the US
Still hasn’t occurred many years later
Mergers and acquisitions using stock (Not cash, because they don’t have any)
Growth targets include non-organic growth (REALLY BAD)
Dilution is required, but it makes it impossible to model per share returns
Exit: Liquidity event needed for the payoff (Either sell to another company or an uplisting)
Lessons Learned:
Don’t buy promotional companies
Don’t buy companies that dilute
Don’t buy companies that can’t self-fund growth
Insider ownership does not equal skin-in-the-game
Be wary of ‘uplisting’ as a catalyst
Summary:
Investors need to constantly be wary of confirmation bias and stay alert for possible red flags. mCloud Technologies stock $MCLDF taught me this lesson. Don’t buy promotional companies that dilute shareholders and can’t self-fund growth.