Liquid Media Group (NASDAQ:YVR) is a Vancouver-based small media company that somehow convinces artists to post their films on its Slipstream video service. They describe it as the “Netflix for adventure/outdoor films.” The problem is the company has no real revenue so far. Most investors are likely going to stay away from YVR stock, despite its story, at least until the company can generate sales.
Maybe that will occur with its new deal with Atari, which will start hosting its Slipstream films. But it could also turn into the same kind of dud deal that its Open Nuage purchase did two years ago. The company spent about $900,000 or so on this gaming platform.
Cut to around two years later and Liquid Media generated just 47,000 CAD in sales for the year ending 2020.
Positive and Negative Catalysts
Another seeming catalyst for YVR stock is its recent capital raise of $6 million at $3.35 per share. Liquid Metal paid out 10% of this amount in fees and received just $5.4 million. As a result, YVR stock has now fallen under $3 per share.
Meanwhile, YVR stock still has a market value of $37 million, according to Seeking Alpha. (My calculation of its market value is around the same at $38.25 million). This is not explainable. The company has a long history of making losses.
For example, in 2020, it lost 5.1 million CAD, and in the prior two years losses were over 7.5 million CAD each year (ending November) There is every reason to believe that this will continue this year. This can be seen on page 6 of its recent 20-F filing.
In addition, there is no reason to believe that its Slipstream service will ever generate any substantial revenue. So far, the company does not indicate how many subscribers this service presently has. Nor is there any guidance along with the new Atari joint venture/strategic partnership.
As a result, investors are left scratching their heads about the real underlying value of the stock. Why, for example, would any investors have put money in the stock at $3.35 per share? What did these investors know about the upside of the value of YVR stock that no one else sees right now?
Not Worth Much More Than Cash
On page 60 of the 20-F filing, the company said that as of March 1, it had 10,875,568 shares outstanding. Since then, on March 22, the company issued 1,791,045 million shares in its $6 million equity offering. That brings the total to 12.667 million shares.
Therefore, with $5.4 million in the bank, net after expenses, the cash per share is 42.6 cents per share. That is all YVR stock is probably worth right now.
However, one might be able to find a buyer for its remaining assets for maybe $1 million, or 7.89 cents per share. That brings its total value to probably about 50.5 cents per share, or $6.4 million, not its present $38.25 million market capitalization.
What To Do With YVR Stock
This stock is going to be volatile. You can’t hoodwink the market just because you have a public media company. YVR stock is likely to slide down further closer to its inherent cash per share plus a small premium, or 51 cents per share.
That will happen unless the company can show that it now has the ability to generate real and recurring revenue. If it does, watch out. The stock could turn around dramatically. But right now, I don’t see how it has the ability to attract large numbers of subscribers.
For example, its Slipstream service costs $4.99 per month or $60 per year. But it only has 300 films on that service. Let’s say that somehow the market would be willing to give it a 10 times revenue valuation.
That implies it would need to generate $3.8 million in sales. If we divide $3.8 million by $60 annually, Slipstream would have to pick up over 63,333 subscribers willing to watch just 300 films. They probably don’t have even 5% of that amount. So you see my point. The company’s valuation right now is too high.
Most investors, therefore, will wait for YVR stock to sell substantially below $1 before they wade into Liquid Media.
On the date of publication, Mark R. Hake did not hold a long or short position in any of the securities in this article.