Times are changing for Ideanomics (NASDAQ:IDEX) and IDEX stock.
On March 31, the company announced its 2020 fourth quarter results. Hidden in the press release was a line item on the balance sheet entitled “Fintech Village.” According to the balance sheet, Fintech Village had an asset value of $7.25 million at the end of December, down from $12.6 million a year earlier.
I had never heard of Fintech Village. It just goes to show you can never look too closely at a company’s financial statements. Needless to say, it got me curious. What was or is this place?
So, as broadcaster Paul Harvey would say, “here is the rest of the story.”
Fintech Village and IDEX Stock
Fintech Village began to take shape in summer 2018.
On July 11, what was then known as Seven Stars Cloud Group announced that it had purchased a 58-acre property on the old University of Connecticut campus in Hartford. The company paid $5.2 million with plans to build a $283 million technology and innovation hub on the property.
As part of its plans, it even got up to $10 million in funding from the state to build its headquarters. In exchange, the state would forgive the loan if it created 330 jobs over five years.
It even hired fancy architects to draw up a conceptual plan for the campus.
“Fintech Village, global headquarters of Ideanomics, redevelops a 58-acre former commuter-based college campus into an entrepreneurial work-live-play campus and an international center for financial technology and innovation,” The Journal of the American Institute of Architects reported on July 29, 2019.
“This unique blending of academia, industry and community, and synergy between buildings and landscape offer a first-of-its-kind setting on the U.S. East Coast.”
You’ll notice that the statement references Ideanomics rather than Seven Stars. The company name was changed in August 2018, shortly after making the real estate purchase. Seven Stars’ executive chairman and CEO at the time, Bruno Wu, better reflects its fintech focus.
Today, Bruno Wu is no longer CEO but remains Ideanomics’ chairman.
So, arguably, Fintech Village made sense at the time.
IDEX Stock: A Change of Direction
The company’s Q4 2020 report makes it clear that Ideanomics Mobility is the future for its shareholders.
“We are very pleased with the transformation that took place this past year,” said Alf Poor, CEO of Ideanomics.
Poor highlighted the fact that electric vehicle (EV) revenue in 2020 was $19.5 million, 622% higher than a year earlier. It accounted for 73% of its $26.8 million in overall revenue.
As the company’s Sales-2-Financing-2-Charging (S2F2C) business model gains traction from its acquisition of WAVE charging systems and EV sales in China, shareholders have cause to be optimistic about the future. I said as much in my March article about Ideanomics.
However, after the end of the fourth quarter, its other business, Ideanomics Capital, went and paid $40 million for Timios, a real estate technology platform for title and escrow services.
That adds profits but puts the company back on the holding company trail.
Which begs the question: is it an operator or an investor?
What Happened to Fintech Village?
On page 6 of its 2020 10-K, Ideanomics identifies Fintech Village and Grapevine, an influencer marketing platform, as non-core assets to be divested in the future.
On January 28, Ideanomics accepted an offer of $2.75 million for Fintech Village, less than what it paid back in 2018 and much less than the value on its books. It had impairment charges of $3.3 million in 2020 and $2.3 million in 2019 related to Fintech Village’s development.
In July 2020, the Hartford Courant reported that “Contractors have filed more than $4.6 million in liens against the property for unpaid bills.”
That’s not a good look for a company that’s been throwing around cash to buy Timios and WAVE in 2021. In its most recent presentation attached to its Q4 2020 results, Ideanomics says it had $330 million in cash at the end of March. One can only hope the contractors were paid long ago.
My guess is the company wants to forget Fintech Village ever existed.
As I write this, IDEX stock is at $3.29. In early March, I said those that can afford to lose their entire investment might buy some stock. Given the whole Fintech Village situation, I’m inclined to suggest waiting for it to fall lower into the $2s for a greater margin of safety.
I continue to follow its story with equal doses of interest and skepticism.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.