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The Ethical Investor: ESG moves, lesson from the energy crisis and JP Equities’ stock tips

The Ethical Investor is Stockhead’s weekly look at ESG moves on the ASX. This week’s special guest is JP Equity … Read More
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The Ethical Investor is Stockhead’s weekly look at ESG moves on the ASX. This week’s special guest is JP Equity Partners’ director and partner, Nic Brownbill.

The world is in the grip of an ongoing global power crisis that has seen energy prices soaring by thousands of percentage points.

From China to Europe and now India, the cost of energy is surging drastically. The price of natural gas has even quadrupled in some parts of the world.

 

Source: IEA via Reuters

 

But economists are now warning this might be just the first of many power crunches the world will see as we transition into the new economy.

According to a research paper by CommBank’s analyst Vivek Dhar, there are two main root causes that led to the crisis — a strong demand recovery from the pandemic, and an acute shortage of two key power-producing fuels – natural gas and thermal coal.

As economies reopen, there is a sudden pent up demand from consumers which meant that factories were forced to switch on their production capacity at short notice. This was exacerbated by a colder than usual European autumn, as the continent potentially faces a more-freezing-than-usual winter season.

In China, the crisis mainly stemmed from an undersupply in local production of coals, according to Dhar, adding that coal supply has been hampered in China because of the government’s own environmental protection regulations.

So what can we learn from all this?

Dhar reckons that we are transitioning into the new economy too fast, too soon.

“What the recent energy crisis has shown is that the energy transition needs to be planned carefully,” Dhar wrote.

“This will mean significant investment in renewable generation, batteries, electricity grids and hydrogen.”

But he thinks the roll-out of a decarbonised grid and role of gas need to be clearly defined too.

“Under-investing in gas infrastructure relative to its role in coming years will only serve to make Europe’s energy market more vulnerable to prolonged gas shortages, and increase dependence on Russia.”

Like Europe, China’s decarbonisation ambition will need to be planned as well, Dhar said.

“If coal mines and coal power plants are closed before a renewable replacement is in place, power shortages in China could be an ongoing concern.”
 

What’s happening in Australia

Australians have chosen climate change as the top ESG priority, according to the latest survey conducted by global ESG consultant, SEC Newgate.

And more than half of the 1,000 Aussies surveyed said they were happy with the direction the government is taking on the environment.

ESG Rio
Source: Survey by SEC Newgate

 

Aussie respondents also nominated retailers Coles Group (ASX:COL) and Woolworths (ASX:WOW) as the top local companies when it came to doing well on ESG metrics.

These results should provide food for thought for PM Scott Morrison, who’s currently caught in a political wrangle with the Nationals in setting our 2050 climate goals.

The PM has told Liberal colleagues that he wants to bring a binding 2050 net zero commitment to the COP26 Summit in Glasgow next month, without having to upgrade Australia’s 2030 commitments.

Nationals Leader and also Deputy PM, Barnaby Joyce, said however that he was willing to back the 2050 targets only if funding for regional producers and farmers were made as part of the deal.
 

Special guest JP Equities’ Nic Brownbill shares his views and ESG stocks

Nic Brownbill, a partner at JP Equity, told Stockhead that decarbonisation is a mega global investment opportunity, one that JP Equity wants to be all in on.

How big is the potential for ESG investing?

“We see the whole decarbonisation theme as the next mega global investment opportunity. An estimated $41 trillion is required to decarbonise the planet. It’s going to be a bigger opportunity than the crypto market, because unlike cryptos, the carbon market is going to be mandated by governments, major asset managers and pension funds.”

Which segment of the ESG market do you see outperforming?

“Some companies will fall short in trying to make their carbon targets, so the balance will need to be met with carbon credits. I think carbon emissions will eventually be metricated, and the carbon offset market is going to be a way for major companies to offset their emissions.”

Would that investment opportunity catch on in Australia?

“I believe the Australian market hasn’t really caught on to the opportunity of this yet. But I think something will really start to emerge from the COP26 conference in November, where you’ll see a sustained mega theme starting to unfold in this country.

“I think we will start to see a complete emergence of Australian companies in the carbon space over the next few months and beyond.”

What are the ASX stocks that JP Equity likes in the carbon credit space?

One ASX stock that we’ve been watching very closely is  Fertoz (ASX:FTZ). They’re a leading North American fertiliser manufacturer that produces a unique low-emission rock phosphate product that increases crop yield by 15%.

“Importantly, it can generate significantly lower CO2 emissions in manufacturing compared with other commercial fertilisers.

“This presents a really significant opportunity because agriculture as a sector accounts for 24% of all human generated greenhouse emissions. Fertoz is one of the first movers in the carbon credit market, and since May this year has been issuing carbon offset credit certificates.

“It’s not a matter of if, but when disclosure of carbon emissions will become metricated. And as a result, Fertoz is getting some strong enquiries from other companies looking to offset their footprints by buying carbon credits.”

Any other ASX stocks you like in the ESG space?

“We’re also bullish on Mpower (ASX:MPR). The company is Australia’s leading specialist in renewable energy, battery storage and micro-grid business. It has a focus on five megawatt solar farms, and is in the process of creating an initial portfolio of 20 sites across Australia in the coming years.

“That gives them an aggregate capacity of around 100 megawatts, and an estimated value of more than $150 million. It’s now down to what the team can deliver in some of those projects to build up the portfolio.”

 

Notable ASX ESG-related news during the week

Rio Tinto (ASX:RIO)

The energy giant announced that it was targeting a 50% reduction in Scope 1 and 2 emissions by 2030, and a 15% reduction by 2025 from a 2018 baseline of 32.6Mt.

Around $7.5 billion in direct capital expenditure will be spent on decarbonising Rio Tinto’s assets from 2022 to 2030, including $0.5 billion per year from 2022 to 2024.

Strandline Resources (ASX:STA)

The company released its Sustainability Report for 2021, outlining its commitment to the United Nations Sustainable Development Goals (UNSDGs).

STA said it’s focused on managing development risks at its Coburn project in WA to safeguard workers and ensure environmental compliance.

Lithium Power (ASX:LPI)

The company has appointed global consulting firm Deloitte to ensure a robust ESG program at its Maricunga project in Chile.

Deloitte has been tasked to imbed sustainable protocols in LPI’s lithium extraction operations, and to establish ambitious standards for LPI to become a carbon neutral producer, while keeping high standards on the social aspects.

Jadar Resources (ASX:JDR)

The company also said it has completed its maiden Sustainability Plan, with strategies aligned to the UNSDGs.

 

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

The post The Ethical Investor: ESG moves, lesson from the energy crisis and JP Equities’ stock tips appeared first on Stockhead.




Author: Eddy Sunarto

Energy & Critical Metals

Cybernetic Technologies Ltd (OTCMKTS: HPIL) Heats Up as Co Sells NFT Procurement, Secures Equity Credit Line as Apogee Dynamics, Medusa Intel, World Gaming Group & ZIPPA Gain Traction

Cybernetic Technologies Ltd (OTCMKTS: HPIL) is a little Company trading in sub penny land that continues to make big moves and has a huge investor following…

Cybernetic Technologies Ltd (OTCMKTS: HPIL) is a little Company trading in sub penny land that continues to make big moves and has a huge investor following that continues to accumulate at current levels. The stock has been getting noticed by investors ever since top-level music executive Stephen Brown of Crank Media who took his last Company from nothing to value at over $500 million on the NASDAQ took over the Company. HPIL officially changed its name to Cybernetic Technologies, Ltd. affected a major share reduction with plans to change its ticker symbol to CYBT. CEO Stephan Brown is aggressively focused on getting all the filings in and becoming “pink current” and up listing to OTCQB with the longer-term plan of up listing to the NASDAQ.  

The Company boasts a number of exciting divisions including Apogee Dynamics Ltd. which is developing its own electric auto named “APOGEE D7” using the powertrain developed by L. Ferrox Tutinean. Apogee also recently signed an NDA with ANSYS to enter into discussions about how the two will work together on the companies Apogee D7 and its Power Train Management System, currently in development. ANSYS is a component of the NASDAQ-100 index currently trading at $358 per share. Cybernetic has also launched a new subsidiary company Medusa Intel Technology Ltd., to enter into the world of Artificial Intelligence (“AI”). The Company’s World Gaming Group Inc. division is currently launching 2 games; Santa Run and Get Santa. Another very exciting division of HPIL is “ZIPPA” a unique multi gaming global platform for gamers that will be housed at www.zippa.gg and is set to compete with the likes of “TWITCH”,”TIKTOK and “TRILLER”. ZIPPA is now in the internal Beta testing stage and will move to a formal Beta program in November that will include Pro-Gamer partners.  HPIL recently sold its NFT Procurement LTD division to Stargaze Entertainment Group Inc. who will issue 60 million shares of STGZ to HPIL. STGZ is currently trading at $0.1342 making HPIL’s 60 million shares worth around $8 million in STGZ stock. HPIL will be filing a registration statement within 30 days to then be able to disperse the shares to HPIL shareholders on a designated plan.  Earlier this year HIPL secured a Ten Million Dollar equity credit line with Auctus Fund LLC. 

Cybernetic Technologies Ltd (OTCMKTS: HPIL) operating out of Vancouver, Canada is a worldwide diversified company developing projects with cutting edge technology. New HPIL CEO Stephen Brown is the founder of a successful Independent Record label in the 90’s, Mr Brown went on to form a ground breaking streaming video company called Vidnet with the vision that the Internet would eventually have a major position in the Music and Film distribution market. Vidnet became one of the top entertainment sites on the web, streaming over 5 million videos monthly and providing content to such companies as British Telecom, Microsoft, Disney, Lycos, Alta Vista and many more, along with industry alliances such as entertainment giants, Sony Music, Warner Bros and EMI Capital. Vidnet had one of the world’s largest collections of music videos on line. Mr Brown built the company from 5 to over 100 employees; and also took the company public on the NASDAQ, reaching a market cap of over $500M.   

Also on the executive management team is President, David Postula. David is a seasoned senior executive with broad experience driving strategy, business optimization and revenue growth across a number of technology segments. He has a true passion for new technology and business strategy, which he brings to his role with Crank Virtual a division of Crank Media. Prior to joining Crank Virtual, David was Vice President of Strategy and Business Development for Tower Semiconductor, where he was responsible for driving strategy, roadmaps, and both customer & partner alliances in support of $1B of 2020/2021 Revenues. Before that, David was the Vice President of NA Sales at Global Foundries, where he co-created, implemented and executed a sales strategy that exceeded new customer and revenue targets by 20%.

Perhaps the most exciting part of HPIL is Apogee Dynamics Ltd. The Company joined forces with a group led by L. Ferrox Tutinean to launch Apogee a Company that Cybernetic Technologies is a majority owner. In regards to Apogee Dynamics we learned in the call that a major investors and shareholder in the Company contacted Stephan Brown about L. Ferrox Tutinean self-charging drive train. It is a highly disruptive early-stage technology that allows electric cars, boats and motorcycles to be charged while in use instead of being charged by plugging them in like tesla and other EVs. This technology is still in its early stages however Stephan Brown has been making rapid progress. The Apogee Dynamics website should also be updated in the next 30 days and Mr. Brown has already teased some developments with the D7 as well as key partnerships.  

Cybernetic reported it has decided to develop its own electric auto named “APOGEE D7” using the powertrain developed by L. Ferrox Tutinean and Apogee Dynamics Ltd. The plan for the new Apogee D7 is a 4-seater vehicle that will not only use the new Apogee powertrain it will have up to 10 partners all utilizing their DISRUPTIVE business models from Technology, Green, Materials and Media that will challenge the future of the auto industry as it is known today. All partners will have their imprint on the vehicle and will be an instrumental part of its functionality. Cybernetic signed an NDA with ANSYS to enter into discussions about how the two will work together on the companies Apogee D7 and its Power Train Management System, currently in development. ANSYS is a component of the NASDAQ-100 index currently trading at $358 per share with a market capitalization of over $3.5 billion and 2020 revenues over $1 billion and over 4,000 employees. 

The Company recently signed an LOI with the representatives of the Michael Czysz estate to develop a proof-of-concept Electric Motorcycle under the Apogee Dynamics Power Management System. This brings together revolutionary Apogee technology with Electric Motorcycle world-champion pioneer MotoCzysz, whose legendary visionary, Michael Czysz, passed away in 2016. Management stated they are excited to be moving to a long-form agreement with MotoCzysz on this thrilling project. As early innovators in the Electric Vehicle space, they are a perfect match to what Apogee aspires. Their E1pc raced on the cutting edge of EV technology, winning 4 Isle of Man racing championships. Apogee’s powertrain system will provide a unique profile in the Electric Motorcycle segment, providing both advanced power distribution as well as unrivalled range.  

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HPIL

Cybernetic Technologies has launched a company Medusa Intel Technology Ltd a subsidiary to enter into the world of Artificial Intelligence (“AI”) along with select partners the company has been working with for the past few months. Medusa was created over a span of 30 years by  L. Ferrox Tutinean of Apogee Dynamics / CT (HPIL).  Medusa Intelligence a division of Cybernetic Technologies Ltd (the “Company”) (OTC: HPIL) announces it will launch META DATA ANALYTICS a tracking program that will use algorithms along with its own program to be used in the entertainment industry first and to then potentially expand in to other areas.“We are so excited about the Medusa (AI/Artificial Intelligence) “Meta Data Analytics” project that we hope to change how the internet and the human thought process could change its purchasing decisions”, said Stephen Brown. 

Another division of HPIL is World Gaming Group Inc. which has been involved in blockchain projects and have developed “GAMEZCASH” and “TUNEZCASH” that are to be used as a new form of currency in the esports/gaming world and the online music industry.  World Gaming Group will soon be launching one of its many games in development “SANTA RUN”. A mobile game app with many fun elements for all ages within the app with players able to win great prizes. Santa Run is a holiday themed endless runner game, where consumers play against friends and others to challenge for the highest score and win great prizes. Management has been plans for the game recently comparing it to Candy Crush. They also recently reported it will launch its long awaited mobile game “GET SANTA” officially on December 1st, 2021. 

The Company recently finished building “ZIPPA” a unique multi gaming global platform for gamers that is set to launch on September 1, 2021. The platform will be housed at www.zippa.gg and is set to compete with the likes of “TWITCH”,”TIKTOK and “TRILLER”. ZIPPA has been working diligently to separate itself from Tik Tok and Triller and concentrate fully on the ESports/Gaming industry as the revenues are 4 times more: The valuation and revenues are simply amazing and ZIPPA with its unique approach and partnerships plans on capitalizing on this and expanding into other similar markets in 2022. ZIPPA is now in the internal Beta testing stage and will move to a formal Beta program in November that will include Pro-Gamer partners. 

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HPIL is a little Company trading in sub penny land that continues to make big moves and has a huge investor following that continues to accumulate at current levels. The stock has been getting noticed by investors ever since top-level music executive Stephen Brown of Crank Media who took his last Company from nothing to value at over $500 million on the NASDAQ took over the Company. HPIL officially changed its name to Cybernetic Technologies, Ltd. affected a major share reduction with plans to change its ticker symbol to CYBT. CEO Stephan Brown is aggressively focused on getting all the filings in and becoming “pink current” and up listing to OTCQB with the longer-term plan of up listing to the NASDAQ. The Company boasts a number of exciting divisions including Apogee Dynamics Ltd. which is developing its own electric auto named “APOGEE D7” using the powertrain developed by L. Ferrox Tutinean. Apogee also recently signed an NDA with ANSYS to enter into discussions about how the two will work together on the companies Apogee D7 and its Power Train Management System, currently in development. ANSYS is a component of the NASDAQ-100 index currently trading at $358 per share. Cybernetic has also launched a new subsidiary company Medusa Intel Technology Ltd., to enter into the world of Artificial Intelligence (“AI”). The Company’s World Gaming Group Inc. division is currently launching 2 games; Santa Run and Get Santa. Another very exciting division of HPIL is “ZIPPA” a unique multi gaming global platform for gamers that will be housed at www.zippa.gg and is set to compete with the likes of “TWITCH”,”TIKTOK and “TRILLER”. ZIPPA is now in the internal Beta testing stage and will move to a formal Beta program in November that will include Pro-Gamer partners.  HPIL recently sold its NFT Procurement LTD division to Stargaze Entertainment Group Inc. who will issue 60 million shares of STGZ to HPIL. STGZ is currently trading at $0.1342 making HPIL’s 60 million shares worth around $8 million in STGZ stock. HPIL will be filing a registration statement within 30 days to then be able to disperse the shares to HPIL shareholders on a designated plan.  Earlier this year HIPL secured a Ten Million Dollar equity credit line with Auctus Fund LLC. We will be updating on HPIL when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with HPIL.

Disclosure: we hold no position in HPIL either long or short and we have not been compensated for this article.

The post Cybernetic Technologies Ltd (OTCMKTS: HPIL) Heats Up as Co Sells NFT Procurement, Secures Equity Credit Line as Apogee Dynamics, Medusa Intel, World Gaming Group & ZIPPA Gain Traction first appeared on Micro Cap Daily.

Author: Boe Rimes

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Energy & Critical Metals

Canadian Lithium Developer Receives US$100 Million Equity Infusion from Leading US Investment Group

Source: Streetwise Reports   11/24/2021

Standard Lithium Ltd.’s shares rose 22% after the firm reported that a Koch Investments Group subsidiary…

Source: Streetwise Reports   11/24/2021

Standard Lithium Ltd.‘s shares rose 22% after the firm reported that a Koch Investments Group subsidiary has agreed to make a strategic investment in the company of CA$127.07 million via a direct private placement.

Lithium project developer Standard Lithium Ltd. (SLI:TSX.V; SLI:NYSE American), which is engaged in development, extraction and production of lithium carbonate, today announced that “Koch Strategic Platforms (KSP), a subsidiary of Koch Investments Group, will make a US$100 million investment in Standard Lithium through a direct private placement to support the company’s strategic development goals.”

The companies noted that the KSP’s decision to invest in Standard Lithium was made after extensive due diligence regarding Standard’s LiSTR DLE technology, its Lanxess project’s demonstration plant and its project development plans.

In addition to the direct equity investment, the two firms expect to pursue strategic opportunities with other Koch Industries affiliate companies to achieve Standard Lithium’s project development objectives. Specifically, the firms mentioned that Koch Engineered Solutions (KES) will be an excellent collaborative partner that can provide key process equipment, engineering, procurement, and construction services and Koch Minerals & Trading (KM&T) is well suited to handle trading of required materials and lithium products produced.

The company advised that the net proceeds from the investment will be used to continue and accelerate its first commercial Lanxess facility project and to advance its South West Arkansas Lithium Project. The funds will also be utilized to further improve and commercialize Standard’s modern lithium extraction and processing technologies that in turn will allow for even greater project expansion.

Standard Lithium’s CEO Robert Mintak commented, “We’re entering an important phase for Standard Lithium and we’re thrilled to be starting it with a globally recognized industrial leader like Koch Strategic Platforms as a partner…KSP has an impressive track record of investing in disruptive technologies and their backing is an important endorsement of the Company’s core technology, development plans and of our intent to make the Gulf Region a leading supplier of lithium resources.”

Koch Strategic Platforms’ President David Park remarked, “KSP is focusing on investing in companies with strong tailwinds that are disrupting the market as we know it. We are excited to invest in Standard Lithium as they pave a path forward towards lithium production here in the U.S. This is an exciting time for energy transformation and we believe KSP’s investment in Standard Lithium can help accelerate the production of lithium resources right here at home.”

The report indicated that through a direct private placement, KSP will invest a total of CA$127.07 million (US$100.0 million) in Standard Lithium. In exchange, KSP will receive 13,480,083 of Standard Lithium’s common shares at a price of CA$9.43 (US$7.42). The transaction is conditional upon adherence to certain statutory resale restrictions under U.S. and Canadian securities laws and remains subject to ordinary closing conditions and approval from TSX Venture Exchange.

Standard Lithium Ltd. is a lithium development and production company headquartered in Vancouver, B.C. The firm at present is engaged in testing and proving commercial viability of lithium extraction from greater than 150,000 acres of permitted brine operations at its Lanxess Project in southern Arkansas. The firm stated that at its flagship Lanxess south plant facility, it has it has commissioned “a first-of-a-kind industrial-scale direct lithium extraction demonstration plant that utilizes its proprietary LiSTR technology to selectively extract lithium from Lanxess’s tail brine.”

The company mentioned that its processes are environmentally friendly as there is no need to build evaporation ponds. In addition, Standard’s methods significantly reduce processing time and enhance lithium recovery yields. The firm noted that it is also actively pursuing a 30,000-acre property package of lithium resources in southwest Arkansas offering brine leases as well as 45,000 acres of mineral leases in San Bernardino Co., Calif.

Koch Strategic Platforms has offices in Atlanta, Ga. and Wichita, Kan. and is one Koch Investments Group’s six key subsidiaries along with Koch Asset Management, Koch Disruptive Technologies, Koch Equity Development, Koch Investment Management and Koch Real Estate Investments. KSP was established in 2020 with its efforts centered around making key strategic investments in both public and private high-growth companies across many industries that demonstrate innovative and disruptive potential.

Standard Lithium started the day with a market cap of around $1.3 billion with approximately 147.4 million shares outstanding. SLI shares opened more than 11% higher Friday at $9.68 (+$0.98, +11.26) over Thursday’s $8.70 closing price. The stock traded Friday between $9.18 and $10.74 per share and closed for trading at $10.63 (+$1.93, +22.18%).

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Disclosure:
1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

 

( Companies Mentioned: SLI:TSX.V; SLI:NYSE American,
)





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Energy & Critical Metals

President Trump’s Social Media SPAC Could Now Have Interesting Risk-Reward Characteristics

Former U.S. President Donald Trump’s SPAC stock, Digital World Acquisition Corp. (NASDAQ: DWAC), has reversed ~60% of the outsized gains
The post President…

Former U.S. President Donald Trump’s SPAC stock, Digital World Acquisition Corp. (NASDAQ: DWAC), has reversed ~60% of the outsized gains it realized in the first two days (October 21 and 22) after its merger agreement was announced. The decline may have created a second potential entry point for this extremely volatile — and controversial — stock.

On October 20, President Donald Trump, perhaps the most polarizing world figure in decades, announced an agreement whereby the Trump Media & Technology Group (TMTG) will merge in a SPAC transaction with SPAC sponsor DWAC. TMTG intends to launch a conservative social network called TRUTH Social. Ultimately, after regulatory and shareholder approval, TMTG would become the surviving publicly traded company.

Details on the venture are scarce, but TRUTH Social plans to launch for invited users before year-end 2021 and hopes to be available to all users in early 2022. The company also expects to create a subscription video-on-demand service.

The principal issue which has affected the stock, particularly over the last week, seems to be a late October report by The New York Times that DWAC’s founder Patrick Orlando may have been in discussions with President Trump for months prior to DWAC’s public market listing in September 2021. According to U.S. law, a SPAC sponsor is not supposed to have a merger “pre-planned” at the time of its IPO. 

Such discussions can begin only after the empty-shell SPAC sponsor has begun trading on a stock exchange. The thinking is that having an agreement worked out beforehand would make it too easy for private companies to go public via a SPAC transaction and therefore avoid the long, detailed and sometimes convoluted SEC S-1 filing process.

The Trump discussion timing issue received more headlines on November 18 when U.S. Senator Elizabeth Warren, a vocal opponent of President Trump, wrote an open letter to SEC Chairman Gary Gensler, asking him to investigate the matter. Senator Warren suggested there could be violations of securities laws and requested an answer by November 29. According to Reuters, a spokesperson for the SEC has declined comment, saying merely that the SEC does not “comment on the existence or nonexistence of a possible investigation.”

When TMTG and DWAC announced their merger agreement, TMTG said the enterprise value (EV) of the company will be US$875 million. An undefined US$825 million provision was also mentioned which could bring the initial EV to US$1.7 billion. We note these figures are presumably based on an initial US$10 share price, as is the convention with SPACs. 

Since DWAC is trading at US$39.48 (down from a US$94.20 close on October 22), the current implied EV could be around four times these US$875 million/US$1.7 billion figures, or US$3.5 billion to US$7 billion. Reflected in these calculations is some portion of the US$293 million of cash that DWAC has in trust. This cash will initially fund the launch of TRUTH Social. It is not clear if the DWAC-TMTG venture will include private investment in public equity (PIPE) financing that is typically part of SPAC transactions.

We emphasize this is a quite unusual SPAC transaction. In a typical SPAC deal, the underlying business may not yet be generating revenue, but it is at least operating (e.g., electric vehicle SPACs). TRUTH Social is not yet even operating. In addition, the Trump venture provides no forecast information. Since such forecast information is used to justify (frequently inflated) SPAC valuations, this raises the question of how the initial enterprise valuation was determined.

However, Trump supporters are very loyal and may be inclined to support his venture enthusiastically. Many Trump supporters could very well join his platform, including as paying subscribers, particularly given the rapidly approaching (November 2022), highly contentious mid-term Congressional elections. President Trump seems likely to play a large role in these contests.

To put this in numerical context, President Trump at his peak before he was barred from appearing on various social media outlets, had 146.5 million total followers on Twitter, Facebook and Instagram combined. If even a fairly small fraction of these followers were to join TRUTH Social, that platform would have many tens of millions of members.

From a comparative economic perspective, consider the following: Twitter currently has 436.4 million users including 211 million monetizable daily active users. Its stock market value is about US$38 billion. While the number of active users is far from a direct link to stock market capitalization, it does not seem impossible that TRUTH Social could achieve a daily active user base (and therefore an advertising audience) of perhaps a third of President Trump’s previous total followers, or around 50 million. Based on Twitter’s valuation, the market could value such a venture at significantly more than just US$3.5 to US$7 billion — even factoring in the uncertainty regarding SPAC timing discussions between President Trump and DWAC.

Admittedly, DWAC is a difficult-to-analyze stock, as information on its financials and business plan are far from complete. However, for an active investor with high risk tolerance, the stock’s 60%+ collapse over the last month may be overdone. It is, after all, unclear if the SEC will choose to investigate the TMTG/DWAC SPAC transaction, and, even if it does so, what remedy/penalty that regulatory body would require or impose.


Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post President Trump’s Social Media SPAC Could Now Have Interesting Risk-Reward Characteristics appeared first on the deep dive.

Author: Jim McFadden

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