Research Flash -Liquid Meta Capital Holdings Ltd. - (LIQD:NEO,$0.13|N/R) - Discount To Cash, Low Burn Rate
We believe that Liquid Meta is trading at a heavily discounted valuation relative to its cash position. Speaking with management we can confirm the assets LIQD is holding are entirely comprised of US dollars or US dollar coin equivalents. Due to the current turmoil in the cryptosphere LIQD has optioned to exit all positions and staking agreements; and as a result, has reduced their quarterly cash burn to ~US$210K (CAD$286K). Any exposures to FTX have been identified and are US$4.5M, giving LIQD a net cash position of position of US$16.4M, or CAD$0.417 a share. Taking into consideration the burn rate, an investor can expect that cash per share to decease at a rate of CAD$0.021 cents per annum.
The recent turmoil in the crypto market has effectively paused the business activities of LIQD until there is more certainty about the efficacy of staking. As a result of the pause in business LIQD has opted to close all outstanding positions and hold USD or USD coin equivalents. The result of the pause in activity has reduced the quarterly burn rate to ~-US$210 (CAD$286K).
LIQD has opted for a very conservative approach to capital preservation, from speaking with management we understand that there is not a desire to reallocate capital (even if hedged) until there is greater certainty about the outcome of such actions.
Based on the pause of operations we opted for a simple net cash per share valuation. This valuation approach yields a net result of CAD$22.458M in cash (US$39.486M in liquid assets vs. US$18.544M in current liabilities for US$20.941M Net. We then subtract US$4.5M in lost assets from the FTX exchange for a final liquid position of US$16.441M, or CAD$22.458M). Speaking with management we were able to get clarity on the losses associated to holdings on the FTX exchange, and those losses are US$4.5M or CAD$6.149M.
As a result of these losses which were realized during the current quarter, we get a new net cash position of CAD$22.458M. Dividing our net cash by total shares outstanding of 53,837,246 we able to estimate CAD$0.417 per share.
Due to the slowdown in operations as the company reassesses their opportunities, burn rate has slowed to ~CAD$286k/quarter according to management. Assuming a year of burn, we come to a cash value per share of CAD$0.388/share. Current trading at CAD$0.12, a 69% discount.