The era of free money, which lifted portfolios for much of the last decade, is over, and advisors will have to work harder to provide returns for clients.
As investment returns are going to be harder to generate on a go-forward basis, diversification will play an increasingly important role in portfolios. We believe the low-cost set-it-and-forget-it 60/40 portfolios will no longer provide the lucrative returns that investors have grown accustomed to.
For the second consecutive year, inflation will be a key theme in investing. Inflation will be stickier than people think, and as headline line numbers abate, beware of the siren calls of victory over inflation too soon, according to Kristof Gleich, president and CIO of Harbor Capital Advisors.
However, this challenging landscape unveils opportunities for advisors to add value to client portfolios. As advisors look to diversify portfolios and navigate stubborn inflation, the Harbor All-Weather Inflation Focus ETF (HGER) is a compelling solution. The fund aims to provide investors with an inflation hedge through exposure to the Quantix Inflation Index (QII), which is made up of liquid commodity futures, weighted towards the goal of maximizing the correlation to inflation.
Launched in February 2022, HGER has already amassed an impressive track record. The fund has increased 11.70% between inception (February 9) and January 12, compared to the Bloomberg Commodity Index’s gain of 3.30% during the same period, each on a total return basis. Since December 12, HGER has gained 5.90% while the Bloomberg Commodity Index has declined -1.2%, each on a total return basis.
Notably, in the first half of 2022, HGER was the only inflation-focused ETF with positive returns.1
HGER’s underlying index — the QII — is a dynamic commodity index with the objective of being a diversified inflation hedge for investors. The index places more weight on those commodities which have higher pass-through costs to inflation, such as gasoline, and a lower weighting to those with lower pass-through costs, such as cotton or cocoa.
The QII also includes a scarcity debasement indicator to indicate what the source of inflation is; in a debasement regime, where inflation is coming from a weaker USD, the QII tends to tilt toward gold, and in a scarcity regime, where inflation is coming from demand outstripping supply, the QII will tilt toward consumable commodities such as oil.
HGER, which carries an expense ratio of 68 basis points, is also designed to react to changing environments, lowering the risk of being tied up in a situation in which the futures price of a commodity is higher than the spot price.
Investors should carefully consider the investment objectives, risks, charges and expenses of a Harbor fund before investing. To obtain a summary prospectus or prospectus for this and other information, visit harborcapital.com or call 800-422-1050. Read it carefully before investing.
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate and when redeemed may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end at harborcapital.com or by calling 800-422-1050.
All investments involve risk including the possible loss of principal. Please refer to the Fund’s prospectus for additional risks. For current performance and fees: HGER
The Quantix Inflation Index is calculated on a total return basis, which combines the returns of the futures contracts with the returns on cash collateral invested in 13-week U.S. Treasury Bills. This unmanaged index does not reflect fees and expenses and is not available for direct investment. The Quantix Inflation Index was developed by Quantix Commodities LP and is owned by Quantix Commodities Indices LLC.
The Bloomberg Commodity Index is a broadly diversified commodity price index distributed by Bloomberg Index Services Limited. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
Diversification in an individual portfolio does not assure a profit.
A “60/40 portfolio” is a guidepost portfolio for a moderate risk investor. Portfolio allocations of 60% allocation to equities to seek capital appreciation and 40% allocation to fixed income help mitigate risk and offer potential income.
A basis point is one hundredth of 1 percentage point.
Quantix Commodities, LP is the subadvisor for the Harbor All-Weather Inflation Focus ETF (HGER)
This article was prepared as Harbor Funds paid sponsorship with VettaFI.
Foreside Fund Services, LLC is the Distributor of the Harbor ETFs.
felixmizioznikov/iStock Editorial via Getty Images
A few days ago, I wrote an article on Genius Group Limited (NYSE:GNS) and how I believe that the company’s investigation into naked short sellers is genuine. I briefly mentioned Helbiz, Inc. (NASDAQ:HLBZ) as a company that is trying to ride the coattails of this movement. So far it has worked, with its stock price rising from $0.12 to briefly over $0.50 in the days since announcing its own fight into alleged naked short sellers.
I now feel compelled to write a focused article on HLBZ. The behavior undertaken by its CEO, particularly on Twitter and on the topic of dilution has made investors jittery. It is my opinion that HLBZ is making a mockery of the naked short investigation that Genius is making a serious attempt to undertake. Genius is trying to improve returns for shareholders. I believe that HLBZ’s attempt – if at all serious – will fail due to its recent dilution. Dilution that will be extremely likely to continue given the poor financial state of the company. The reason why the CEO isn’t committing to not diluting the stock over a long period of time is because he simply can’t. The company has to finance operations until it can slow down its extremely high burn rate.
Background
I was the first person on Seeking Alpha to write an article on HLBZ back in October 2021. It was a play on the warrant arbitrage that worked for a few minutes before both the stock and warrants wildly tanked. However, I had kept following the company and even re-opened a speculative position on the warrants which ended as an unprofitable investment.
While Helbiz was clearly not performing well financially, one thing that kept my interest was the continued and considerable buying by the company’s CEO, Salvatore Palella. I thought him aggressively throwing millions of dollars at his company was a sign that there was a plan to get to financial stability in the near term. I had made contact with the company’s IR representatives asking questions about Helbiz’s operating performance, hopeful that certain issues I saw on the income statement were a result of short term start up costs in the e-mobility space.
However, once it became clear to me that Helbiz’s financials were not going to improve and that deteriorating market conditions for de-SPACs and startup companies were not going to make it easy for the company to survive, I exited my position and shelved my interest. It was obvious to me that this company was going to need a miracle to avoid insolvency, and that it would attach itself to anything that came along in order to do so.
Diving into the poor state of HLBZ’s financials and the dilution that has occurred to keep it afloat
I’m an experienced microcap investor and researcher. So I have seen my fair share of companies in tenuous financial states. I can say the pace at which HLBZ’s financials have deteriorated since I started following this company is one of the worst I have ever seen. The only one that I can think of that is worse was MoviePass from Helios and Matheson Analytics Inc. (OTC:HMNY).
This is a snapshot of the operating income portion of the company’s income statement:
Seeking Alpha
The first thing I want to point out is that this company has always had negative gross margins. The cost of revenue is actually higher than the revenue itself. When I first made contact with the IR representatives, I assumed this was some kind of accounting issue related to purchasing the fleet for its e-scooter and e-bike rental business. But instead of getting better with time and revenue growth, gross margin has actually gotten worse. Back in 2020, the company had $7.9 million in cost of revenue on $4.4 million in revenue, -80% gross margin. Fast forward to the trailing 12-month numbers, and the cost of revenues is $43.4 million on $15.5 million in revenue, -180% gross margin.
Add in operating costs, and the result is a company that has a $69.3 million operating loss on $15.5 million in revenue over the previous four quarters. Interest expense is $7.6 million – nearly half of revenue alone – leading to an overall loss of $85.1 million during that time.
The company reported only $3.7 million in revenue for Q3 2022, down 22% from Q3 2021. Margins actually improved slightly, as the company has started making a concerted effort to cut costs and exit unprofitable revenue streams and markets. With that being said, it still has a long way to go to reduce its burn rate which currently sits at ~$20 million a quarter.
These major losses on minimal revenue have ravaged the balance sheet, as of September 30th, 2022:
HLBZ Q3 Financials
HLBZ is almost out of cash, with only a little more than $3 million left and $14 million in current assets. Current liabilities are $49 million, so the company has a $35 million working capital deficit. Long term liabilities are $19 million, including a $14 million secured loan. Now consider that this was a snapshot from four months ago, and the company has had to fund its operating losses since then. The money to fund these losses have to come from somewhere, and so far it has come from the substantial issuance of shares.
This is a chart of shares outstanding over the past year. It has exploded from around 50 million at the end of September to 142 million today:
This increase in shares outstanding over the past few weeks has come in the form of a slew of shares being issued in the $0.11 to $0.16 range, with the latest one being 8 million shares issued at $0.1185. This is part of a $13.9 million Share Equity Purchase Agreement with YA II PN, Ltd., a Cayman Islands exempt limited partnership also known as Yorkville. I encourage investors to take a look at the performance of the companies that get into similar types of financing deals with Yorkville. That could be an entire article onto itself. But one can surmise from my tone that the performance is generally “not good”.
The saddest part of issuing nearly 100 million shares since September at these low prices is that it does almost nothing to improve the company’s financial fortunes. Let’s assume the $13.9 million SEPA eventually gets exhausted. That may be just enough to fund one quarter of operating losses, assuming the recent cost cutting measures have resulted in some improvement from the $20 million per quarter burn rate. Helbiz is in no better shape now than four months ago, despite tripling its share count.
Dilution tracker shows the potential dilution to be up as high as nearly 220 million. Authorized shares are 285 million, so HLBZ has the ability to dilute up to this limit before it must seek an increase and/or a reverse split at a future AGM. This leads into the next problem. HLBZ is running out of shares to dilute. If it kept on issuing shares in the $0.15 range, it would be out of the ability to raise capital after $10 million or so. And as I showed above, $10 million doesn’t take Helbiz very far. It was desperate for something, anything to come along in order to raise the share price so the company can raise funds at, say, $0.50 instead of $0.15. This leads me into my next point about the CEO’s behavior in the Fintwit sphere.
The behavior of the CEO on Twitter is making investors nervous
The communication of Salvatore Palella on Twitter has made some investors nervous. A scroll through his Twitter feed shows his blatant overuse of the hashtag #nakedshortwar while avoiding legitimate issues being raised about the financial state of the company. But there are some particularly troublesome tweets which I would like to highlight.
Ignoring the unfortunately placed comma that implies the opposite, he is making light of the fact that the company did not dilute on January 25th when the last time they did dilute was January 20th. Does he expect shareholders to be bullish on a company that managed to stave off dilution for a whole two business days?
He stated with great confidence that no dilution will be made for the rest of the week. Note that the tweet was sent at 2:16 pm on January 26th, or Thursday afternoon about two hours before market close. So he felt the need to reassure investors that no dilution will be undertaken for the next eight hours that the market will be open.
The last tweet I’d like to point out is about Yorkville:
Twitter
Even though these types of funds have ways of using related offshore entities in order to short shares, let’s take him on his word and assume that Yorkville has not shorted any shares in its dealing with HLBZ. This is a total red herring. That does nothing to offset the fact any type of short squeeze thesis, whether real or manufactured, will be extremely hampered by the 10’s of millions of shares issued to Yorkville at prices averaging in the low teens. Yorkville might never need to short sell in order to kill a rally. They can just sell their massive position accumulated over January through the SEPA.
Given the recent share issuance, the fact that HLBZ is still in a precarious financial state and that the company is nearing its authorized share count from which it can no longer issue shares, I believe that these conclusions can be reached with a fair amount of certainty:
1. Yorkville, regardless if it has shorted HLBZ shares in the past, has a very strong incentive to dump the shares it recently purchased through the SEPA between $0.11 and $0.16 at profits. Any short squeeze attempt led by retail traders will be greatly hampered because Yorkville is likely dumping into it. Retail investors aren’t making rich naked shorts pay by buying up HLBZ stock. They are providing liquidity for easy profits for Yorkville, a rich fund that specializes in dilutive financing deals.
2. HLBZ is in desperate shape to raise as much funds as it can in order to continue operating. Riding the #nakedshortwar on the backs of others will enable it to a) maintain a good relationship with Yorkville and b) raise funds at $0.25 or $0.50 or $0.75 or whatever short term price pop allows it to. This is better than raising at $0.10 to $0.15 and hitting the authorized share count limit all for one or two more quarters of operations.
The CEO cannot commit to not diluting for more than a couple of days because he MUST dilute at any opportunity that offers a slightly better than worst case scenario. HLBZ has very few options to avoid this, and I strongly suggest to investors to make sure to see signs of these options being successfully undertaken before putting anything other than lotto money into this stock.
What must happen before a naked short investigation on HLBZ can be taken seriously
HLBZ has ridden the coattails of GNS’s naked short investigation, but has been all talk and no action so far. HLBZ can start to be taken seriously by actually undertaking some of the actions of GNS’s CEO Roger Hamilton. In my previous article, I pointed out that an updated forecast for 2023 and limiting of dilution would be two items I would like to see. Hamilton has since mentioned that no offerings are planned at the moment, though I have failed to get confirmation that the planned $7.5 at-the-market offering is being outright cancelled.
Genius announced guidance of $48 to $52 million in revenue, with EBITDA in the $0.5 to $1 million range. Given that this is a $5-$6 million improvement from EBITDA guidance of 2022, we can assume the net loss will also come down from its current run rate of ~$2 million per quarter. This will extend the company’s cash runway, adding further confidence that dilution can be avoided for the foreseeable future. GNS has set a meeting for February 16th to vote on a share repurchase mandate. Finally, Roger Hamilton has provided an honest update to the planned special dividend for GNS.
Helbiz has not provided guidance showing improved financial performance, has not provided any real assurance of no dilution for any material length of time, and has made no serious steps in distributing a special dividend nor does it have the financial resources to do so.
Helbiz has much further to go to attaining breakeven operations compared to Genius, and will need financing in one form or another in order to continue operations. Instead of financing with equity, if the company was able to finance through non-dilutive methods such as a bank loan or long-term debt, that would increase the company’s risk profile but would at least limit near-term dilution risk. A strategic partnership, joint venture or some other funding method by a larger player that didn’t involve dumping tens of millions of HLBZ shares onto the market would also be acceptable. These are the things that investors need to look for before they can take any investigation into naked shorts by HLBZ seriously.
Conclusion: HLBZ will likely be diluting in the near future. If you want a company with a legitimate shot at short squeeze, stick with GNS.
I hope that my article has made it clear that HLBZ will very likely be diluting in the near future. The company hasn’t undertaken any serious action to combat any perceived naked short attack. Helbiz’s near term concern clearly lies with its ability to operate as a going concern. That involves raising funds for operations until it hits a point where it is self funding. Given that gross margins are negative, let alone adding in operating expenses, it has a very long and hard road ahead to get to that point.
Revenue stalled in Q3, and given that it is exiting unprofitable markets, we can assume revenue growth will continue to be stagnant in the near term. I outlined some ways the company can finance its operations without issuing shares, but all of these are long shots. I don’t see any bank or lender issuing financing given the poor state of operations and balance sheet, nor do I see an easy near-term path to a partnership or joint venture in the e-scooter mobility space.
Helbiz will likely continue to dilute, which will completely negate any naked short war, if the company was even remotely serious with this initiative in the first place. On a final note, I challenge any HLBZ investors to confront the company with this article and see how it reacts. A positive and constructive reaction to the issues I raised and the challenges HLBZ is facing might be a sign to start taking HLBZ seriously. A defensive reaction will also show all that investors would need to know about this stock.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
NEW YORK, Jan. 27, 2023 /PRNewswire/ — Pomerantz LLP announces that a class action lawsuit has been filed against certain officers and directors of Fate Therapeutics, Inc. (“Fate” or the “Company”) (NASDAQ: FATE). The class action, filed in the United States District Court for the Southern District of California, and docketed under 23-cv-111-WQH-NLS, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Fate securities between April 2, 2020 and January 5, 2023, both dates inclusive (the “Class Period”), seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, against the Company and certain of its top officials.
If you are a shareholder who purchased or otherwise acquired Fate securities during the Class Period, you have until March 22, 2023 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at [email protected] or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
Fate is a clinical-stage biopharmaceutical company that develops programmed cellular immunotherapies to treat cancer and immune disorders.
On April 2, 2020, after the market closed, Fate announced its entry into a global collaboration and option agreement with Janssen Biotech, Inc. (“Janssen”), one of the Janssen Pharmaceutical Companies of Johnson & Johnson, for cell-based cancer immunotherapies, under which Fate received a $50 million upfront payment (the “Janssen Collaboration Agreement”). In addition, Fate was eligible for up to $3 billion in various milestone payments and double-digit royalties on any net sales from the collaboration. On the news, Fate’s stock price jumped 8.8% in trading on April 3, 2020.
The Complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) the Janssen Collaboration Agreement was less sustainable than Fate had represented to investors; (ii) accordingly, certain the clinical programs, milestone payments, and royalty payments associated with the Janssen Collaboration Agreement could not be relied upon as future revenue sources; (iii) as a result, Fate had overstated the impact of the Janssen Collaboration Agreement’s on Fate’s long-term clinical and commercial profitability; and (iv) as a result, the Company’s public statements were materially false and misleading at all relevant times.
On January 5, 2023, after the markets closed, Fate issued a press release announcing that it had terminated the Janssen Collaboration Agreement. Specifically, the Company disclosed that it was “not able to align with Janssen on their proposal for continuation of our collaboration, where two product candidates targeting high-value, clinically-validated hematology antigens were set to enter clinical development in 2023[.]” As a result of the termination, Fate revealed that all licenses and other rights granted pursuant to the Janssen Collaboration Agreement would terminate, that it would reduce its headcount to about 220 employees in Q1 2023, and that it would discontinue several of its natural cell killer programs in various cancers, including FT516 and FT538 NK cell programs in acute myeloid leukemia, FT516 and FT596 NK cell programs in B-cell lymphoma, and FT538 and FT536 NK cell programs in solid tumors.
On this news, Fate’s stock price fell $6.76 per share, or 61.45%, to close at $4.24 per share on January 6, 2023.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomlaw.com
CONTACT: Robert S. Willoughby Pomerantz LLP [email protected] 888-476-6529 ext. 7980
NEW YORK, Jan. 27, 2023 /PRNewswire/ — Pomerantz LLP announces that a class action lawsuit has been filed against Bioventus Inc. (“Bioventus” or the “Company”) (NASDAQ: BVS) and certain officers and directors. The class action, filed in the United States District Court for the Middle District of North Carolina, and docketed under 23-cv-00032, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired: (a) Bioventus Class A common stock pursuant and/or traceable to the Offering Documents (defined below) issued in connection with the Company’s initial public offering conducted on or about February 11, 2021 (the “IPO” or “Offering”); and/or (b) Bioventus securities between February 11, 2021 and November 21, 2022, both dates inclusive (the “Class Period”). Plaintiff pursues claims against the Defendants under the Securities Act of 1933 and the Securities Exchange Act of 1934.
If you are a shareholder who purchased or otherwise acquired Bioventus Class A common stock pursuant and/or traceable to the Offering Documents in connection to the Company’s IPO or Bioventus securities during the Class Period, you have until March 13, 2023 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at [email protected] or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
Bioventus is a medical device company that focuses on developing and commercializing clinical treatments to engage and enhance the body’s natural healing process.
On January 20, 2021, Bioventus filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission (“SEC”) in connection with the IPO, which, after several amendments, was declared effective by the SEC on February 10, 2021 (the “Registration Statement”).
On or about February 11, 2021, pursuant to the Registration Statement, Bioventus conducted the IPO, issuing 8 million shares of its Class A common stock to the public at the Offering price of $13.00 per share.
On February 12, 2021, Bioventus filed a prospectus on Form 424B4 with the SEC in connection with the IPO, which incorporated and formed part of the Registration Statement (the “Prospectus” and, together with the Registration Statement, the “Offering Documents”).
The Offering Documents were negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading and were not prepared in accordance with the rules and regulations governing their preparation. Additionally, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and compliance policies. Specifically, the Offering Documents and Defendants made false and/or misleading statements and/or failed to disclose that: (i) Bioventus suffered from significant liquidity issues; (ii) the Company’s rebate practices were unsustainable; (iii) accordingly, Defendants overstated the Company’s business and financial prospects; (iv) Bioventus maintained deficient disclosure controls and procedures and internal control over financial reporting with respect to the timely recognition of quarterly rebates; (v) all the foregoing increased the risk that the Company would be forced to recognize a significant non-cash impairment charge, could not timely file one or more of its financial reports, would have to amend one or more of its financial statements, and could not meet its financial obligations as they came due; and (vi) as a result, the Offering Documents and Defendants’ public statements throughout the Class Period were materially false and/or misleading and failed to state information required to be stated therein.
On November 16, 2022, Bioventus issued a press release announcing that it could not timely file its quarterly report for third quarter of 2022 because “of the recent decline in the Company’s market capitalization subsequent to its previously announced financial results for the third quarter of 2022,” which resulted in the Company needing “additional time . . . to assess whether a non-cash impairment charge is required for the third quarter of 2022.” Bioventus also revealed that it “is seeking resolution related to the validity of a revised invoice” for certain “rebate claims” and that “[t]he recognition of additional rebates may impact Bioventus’ recently announced revenue guidance.” In addition, Bioventus disclosed that “its internal controls related to the timely recognition of quarterly rebates were inadequate specifically for the period ended October 1, 2022” and that the Company “is also evaluating whether [it] will be able to meet all of its financial obligations as they come due within one year after the date its financial statements for the period ended October 1, 2022, are issued.”
On this news, Bioventus’s stock price fell $1.00 per share, or 33.67%, to close at $1.97 per share on November 17, 2022.
Then, on November 21, 2022, Bioventus issued a press release announcing revised third quarter 2022 results to account for “additional rebate claims related to certain of the Company’s products and a non-cash impairment charge” that amounted to $189.2 million “due to the recent decline in our market capitalization subsequent to our previously announced financial results for the three and nine months ended October 1, 2022.” That same day, Bioventus belatedly filed its quarterly report on Form 10-Q with the SEC for the third quarter of 2022, advising of various changes to Bioventus’s historical practices that were necessary to account for rebates, stating that these changes materially impacted the Company’s evaluation of its ability to meet debt covenants, resulting in liquidity and going concern disclosures.
On this news, Bioventus’s stock price fell $0.07 per share, or 3.72%, to close at $1.81 per share on November 22, 2022, representing a total decline of 86.08% from the IPO price.
As of the time this Complaint was filed, Bioventus’s Class A common stock continues to trade below the $13.00 per share Offering price, damaging investors.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomlaw.com
CONTACT: Robert S. Willoughby Pomerantz LLP [email protected] 888-476-6529 ext. 7980
NEW YORK, Jan. 27, 2023 /PRNewswire/ — Pomerantz LLP announces that a class action lawsuit has been filed against Affirm Holding, Inc. (NASDAQ: AFRM), and certain officers. The class action, filed in the United States District Court for the Northern District of California, and docketed under 22-cv-07770, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Affirm securities between February 12, 2021 and December 15, 2021, both dates inclusive (the “Class Period”), seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, against the Company and certain of its top officials.
If you are a shareholder who purchased or otherwise acquired Affirm securities during the Class Period, you have until February 6, 2023 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at [email protected] or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
Affirm operates a platform for digital and mobile-first commerce in the United States and Canada. The Company’s platform includes point-of-sale payment solutions for consumers, merchant commerce solutions, and a consumer-focused app. Particularly, Affirm offers a payment service known as “buy-now, pay-later” (“BNPL”), which allows consumers to purchase a product immediately and pay for it at a later time, usually over a series of installments. According to the Company, “[u]nlike legacy payment options and our competitors’ product offerings, which charge deferred or compounding interest and unexpected costs, we disclose up-front to consumers exactly what they will owe — no hidden fees, no penalties.”
The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Affirm’s BNPL service facilitated excessive consumer debt, regulatory arbitrage, and data harvesting; (ii) the foregoing subjected Affirm to a heightened risk of regulatory scrutiny and enforcement action; and (iii) as a result, the Company’s public statements were materially false and misleading at all relevant times.
On December 16, 2021, the Consumer Financial Protection Bureau (“CFPB”) announced that it had launched an inquiry into Affirm’s BNPL payment service, along with four other companies offering BNPL. The CFPB indicated that it was concerned about how BNPL leads to “accumulating debt, regulatory arbitrage, and data harvesting,” and is seeking data on the risks and benefits of the products. In a statement addressing BNPL services, the CFPB Director stated, “[t]he consumer gets the product immediately but gets the debt immediately too.”
On this news, Affirm’s stock price fell $11.74 per share, or 10.58%, to close at $99.24 per share on December 16, 2021.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomlaw.com
CONTACT: Robert S. Willoughby Pomerantz LLP [email protected] 888-476-6529 ext. 7980
NEW YORK, Jan. 27, 2023 /PRNewswire/ — Pomerantz LLP announces that a class action lawsuit has been filed against Avaya Holdings Corp. (NYSE: AVYA), and certain officers. The class action, filed in the United States District Court for the Middle District of North Carolina, and docketed under 23-cv-00003, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Avaya securities between November 22, 2021 and November 29, 2022, both dates inclusive (the “Class Period”), seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, against the Company and certain of its top officials.
If you are a shareholder who purchase or otherwise acquired Avaya securities, you have until March 6, 2023 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at [email protected] or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
Avaya purports to be a “global leader in digital communications products, solutions and services for businesses of all sizes delivering its technology predominantly through software and services.” The Company claims that its “global, experienced team of professionals delivers award-winning services from initial planning and design to seamless implementation and integration, to ongoing managed operations, optimization, training and support.”
The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) the Company’s internal control over financial reporting (“ICFR”) was deficient in several areas; (ii) as a result of these deficiencies, the Company had failed to design and maintain effective controls over its whistleblower policies and its ethics and compliance program; (iii) the Company’s deteriorating financial condition was likely to raise substantial doubt as to its ability to continue as a going concern; and (iv) as a result, the Company’s public statements were materially false and misleading at all relevant times.
On July 28, 2022, Avaya announced the termination of its Chief Executive Officer James M. Chirico, Jr.. The Company also announced preliminary Q3 2022 financial results that included expected revenues and adjusted EBITDA well below previously given guidance and an unquantified but “significant” impairment charge. In addition, Avaya withdrew its 2022 guidance.
On this news, Avaya’s stock price fell $1.19 per share, or 56.99%, to close at $0.90 per share on July 29, 2022.
Then, on August 9, 2022, Avaya announced that: (1) it determined there was substantial doubt about its ability to continue as a going concern; (2) it would not timely file its financial statements for the quarter ended June 30, 2022; (3) its Audit Committee commenced internal investigations into circumstances surrounding the Company’s financial results for the quarter; and (4) the Audit Committee also commenced an investigation into matters raised by a whistleblower.
On this news, Avaya’s stock price fell $0.51 per share, or 45.54%, to close at $0.61 per share on August 9, 2022.
Finally, before the market opened on November 30, 2022, Avaya disclosed in a Current Report filed on Form 8-K with the SEC that “control deficiencies [] management had been reviewing represent material weaknesses in the Company’s internal control over financial reporting” and that “management’s assessment of ICFR included in Item 9A of the Company’s Annual Report on Form 10-K for its fiscal year 2021 ended September 30, 2021, filed with the [SEC] on November 22, 2021 [] should no longer be relied upon.” Specifically, the Form 8-K stated that the Company “did not design and maintain effective controls related to the information and communication component of the Committee of Sponsoring Organizations of the Treadway Commission framework,” “did not design and maintain effective controls to ensure appropriate communication between certain functions within the Company,” and “did not design and maintain effective controls over the ethics and compliance program.”
On this news, Avaya’s stock price fell $0.16 per share, or 14.28%, to close at $0.96 per share on November 30, 2022.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomlaw.com
CONTACT: Robert S. Willoughby Pomerantz LLP [email protected] 888-476-6529 ext. 7980
NEW YORK, Jan. 27, 2023 /PRNewswire/ — Pomerantz LLP announces that a class action lawsuit has been filed against certain officers and directors of Enovix Corporation (or Rodgers Silicon Valley Acquisition Corp. (“RSVAC”) (“Enovix” or the “Company”) (NASDAQ: ENVX; RSVAC). The class action, filed in the United States District Court for the Northern District of California, and docketed under 23-cv-00372, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Enovix common stock (or RSVAC common stock prior to July 15, 2021) between February 22, 2021, through January 3, 2023, inclusive (the “Class Period”). This action is brought on behalf of the Class for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78j(b) and 78t(a) and Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. § 240.10b-5.
If you are a shareholder who purchased or otherwise acquired Enovix common stock or RSVAC during the Class Period, you have until March 7, 2023 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at [email protected] or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
Enovix purports to design, develop, and manufacture silicon-anode lithium-ion batteries using proprietary 3D cell architecture, which the Company claims allow its batteries to achieve higher energy density. Enovix hopes to customize and deliver its batteries to other companies which can then incorporate them into their consumer electronics, such as wearable smartwatches, VR headsets, laptop computers, mobile phones, and electric vehicles. Since launching in 2007, the Company has focused on developing and commercializing its batteries. It did not generate any revenue from its products until the second quarter of 2022.
On February 22, 2021, Enovix announced plans to become a publicly traded company. At that time, Enovix set an “ambitious goal” to both develop its own U.S.-based manufacturing line and to begin delivering products to customers (thereby recognizing its first product revenue) by the second quarter of 2022.
Five months after this announcement, on July 15, 2021, Enovix became a publicly traded company. Rather than go public through a traditional initial public offering, Enovix used a novel method that sidesteps the normal regulatory framework and shareholder protections of the traditional IPO. Enovix merged with a special purpose acquisition company (“SPAC”), a public shell corporation with no business of its own other than to acquire a private company. On July 14, 2021, Enovix was officially acquired by RSVAC, which then changed its name to Enovix Corporation. As a result of this “de-SPAC” transaction, RSVAC’s publicly-traded shares became shares of Enovix when trading opened on the Nasdaq Global Select Market (“Nasdaq”) the following day.
RSVAC’s Chairman and Chief Executive Officer, Defendant Thurman J. Rodgers, (“Rogers”) stayed on as a member of Enovix’s board of directors following the de-SPAC transaction.
Enovix raised $405 million from investors through its de-SPAC merger with RSVAC. In a July 14, 2021 press release, the Company announced that the gross cash proceeds raised through the transaction would “allow Enovix to build out its first two production facilities to support demand from blue chip customers in the global mobile computing market while continuing to develop cells for Electric Vehicles (EVs).”
The Complaint alleges that throughout the Class Period, starting with statements made at the time of the de-SPAC, Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about Enovix’s revenues and ability to manufacture its proprietary battery technology. Specifically, the statements overstated the Company’s ability to product batteries at scale, touting the Company’s “meaningful progress” in scaling up its manufacturing facility, and its being positioned to deliver batteries ahead of competitors, despite its continued manufacturing issues.
On November 1, 2022, Defendants disclosed that the Company would shift its focus from its Gen1 line to developing its Gen2 lines and accordingly reduced its projections for Fab-1 production in 2023. On this news, the Company fell from a close of $18.87 per share on October 31, 2022, to $10.53 per share by the close of trading on November 2, 2022, a 44% percent decline in share price.
On January 3, 2023, Defendant Rodgers hosted a special presentation for investors. During this presentation, he announced that the Company’s Gen2 manufacturing lines would be further delayed because of the need to avoid the same problems plaguing the Gen1 lines.
On this news, the Company’s shares price dropped 41% from a close of $12.12 per share on January 3, 2023 to a close of $7.15 per share on January 4, 2022.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomlaw.com
CONTACT: Robert S. Willoughby Pomerantz LLP [email protected] 888-476-6529 ext. 7980
NEW YORK, Jan. 27, 2023 /PRNewswire/ — Pomerantz LLP announces that a class action lawsuit has been filed against Spectrum Pharmaceuticals, Inc. (NASDAQ: SPPI), and certain officers. The class action, filed in the United States District Court for the Southern District of New York, and docketed under 22-cv-10677, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired
If you are a shareholder who purchased or otherwise acquired Spectrum securities during the Class Period, you have until February 3, 2023 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at [email protected] or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
Spectrum purports to be a biopharmaceutical company focused on acquiring, developing, and commercializing novel and targeted oncology therapies.
The complaint alleges that, before the Class Period, Defendants were conducting a Phase 2 clinical trial called ZENITH20. The ZENITH20 trial was an ongoing, multicenter, multi-cohort, open-label, activity-estimating study evaluating the anti-tumor effects, safety, and tolerability of poziotinib, or “pozi”, in patients with locally advanced or metastatic non-small cell lung cancer (“NSCLC”) that have certain mutations (HER2 exon 20 insertion mutations) and were previously treated with the standard of care. Before the Class Period, the Company had a pre-NDA meeting with the FDA, during which Spectrum confirmed with the FDA that Cohort 2 data could serve as the basis of a new drug application (“NDA”) submission. In Cohort 2, the objective response rate (complete or partial response, which are measures of whether tumors shrink or are eradicated after treatment) was approximately 28% and the median duration of response was 5.1 months.
The HER2 exon 20 insertion mutation occurs in 2-5% of patients with NSCLC. These patients are treated according to the same treatment paradigms as patients with advanced NSCLC without these unique mutations, however, there is an apparent unmet need for these patients because they have a median overall survival of 1.6-1.9 years from the time of diagnosis. According to Defendants, if approved, poziotinib could address an unmet need of NSCLC patients previously treated with the standard of care.
The complaint alleges that, during the Class Period, Defendants represented the safety and efficacy data from the ZENITH20 trial were positive and that they had initiated the required confirmatory phase 3 study. However, unknown to investors, this was not true.
As later revealed to investors, the data submitted by Defendants in support of the NDA failed to show that pozi provided a meaningful advantage over available therapies and therefore was not likely to provide a clinical benefit. During the Class Period, the FDA expressed concerns regarding pozi’s safety and efficacy data, and further, the FDA expressed concern that Defendants’ phase 3 confirmatory trial, which was required to be substantially enrolled at the time of AA, had not enrolled a single patient during the Class Period. The FDA communicated to Defendants that given the concerns regarding the totality of evidence supporting the NDA, the significant delay in confirming benefit with a randomized trial heightened the uncertainty around the risk benefit assessment of pozi.
Starting on September 20, 2022, before the market opened, investors began to learn the truth when the FDA Oncologic Drugs Advisory Committee (“ODAC”) released a briefing document in anticipation of its September 22, 2022 meeting with Defendants to review poziotinib. ODAC is an independent panel of experts that reviews and evaluates data concerning the efficacy and safety of marketed and investigational products for use in the treatment of cancer. The committee makes appropriate recommendations to the FDA, but these recommendations are not binding and the final decision regarding product approval will be made solely by the FDA.
Investors were surprised when, despite the Company’s repeated representations during the Class Period that the data for ZENITH20 were positive, the ODAC briefing document disclosed not only negative data on the safety and efficacy of pozi, but also a failure by the Company to enroll any patients in the required phase 3 confirmatory trial.
As a result of this news, shares of Spectrum common stock declined from a closing price of $1.06 per share on September 19, 2022, to a close at $0.66 per share on September 20, 2022, a decline of $0.40 per share, or over 37% on heavier than usual volume.
Then, according to Reuters, on September 22, 2022, before the opening of the market, trading in Spectrum shares was halted at $0.63 per share pending the outcome of the FDA ODAC meeting.
Also on September 22, 2022, ODAC conducted its meeting concerning poziotinib in which Defendant Lebel participated. During the meeting, ODAC voted 9-4 not to recommend poziotinib for AA.
On September 23, 2022, trading in Spectrum common stock resumed. As a result of this news, shares of Spectrum common stock further declined from a closing price of $0.63 per share on September 21, 2022 before trading was halted, to a close at $0.43 per share on September 23, 2022, a decline of $0.20 per share, or over 31% on heavier than usual volume.
On September 23, 2022, H.C. Wainwright released a report titled “ODAC Votes Against Poziotinib; Debt Deal Announced; Lower PT by $3“. The report noted that the 9 “no” voters from the ODAC cited “non-meaningful benefit over existing therapies and cited dosing issues… Issues related to the Phase 3 confirmatory trial for poziotinib were also raised… as that study has not yet started.” The report further stated that “We believe the ODAC vote is negative for potential approval of poziotinib. We note that the FDA does not have to follow the recommendations of the ODAC; however, the FDA’s views in the briefing documents and during the meeting do not bode well for approval, in our opinion.”
Also on September 23, 2022, Jefferies released a report titled “Based on Negative Pozi Adcom, We Anticipate CRL; Next Steps for Pozi Unclear”. The report noted “Adcom voted 9-4 that pozi benefits do not outweigh risks. Panel agreed w/ FDA concerns on dosing, lack of confirm trial progress, and that pozi data do not show clear benefit vs SOC.” Further, the Jefferies report stated that the “Panel decided evidence on efficacy & unmet need did not outweigh concerns, namely: 1) dosing concerns w/ incongruence b/w 16mg QD dose under review and confirmatory trial’s 8mg BID; 2) lack of confirmatory trial progress w/ no pts enrolled as of yet and data likely not until 2026, increasing risk to pts.”
On November 25, 2022, Defendants caused Spectrum to issue a press release disclosing their receipt of a Complete Response Letter (“CRL”) from the FDA regarding Spectrum’s NDA for poziotinib.
As of December 5, 2022, Spectrum stock has not recovered, closing at $0.47 per share.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomlaw.com
CONTACT: Robert S. Willoughby Pomerantz LLP [email protected] 888-476-6529 ext. 7980
WHY: Rosen Law Firm, a global investor rights law firm, reminds purchasers of the securities of ESS Tech Inc. (NYSE: GWH) between August 11, 2022 and December 7, 2022, both dates inclusive (the “Class Period”), of the important March 13, 2023 lead plaintiff deadline.
SO WHAT: If you purchased ESS Tech securities during the Class Period you may be entitled to compensation without payment of any out of pocket fees or costs through a contingency fee arrangement.
WHAT TO DO NEXT: To join the ESS Tech class action, go to https://rosenlegal.com/submit-form/?case_id=10877 or call Phillip Kim, Esq. toll-free at 866-767-3653 or email [email protected] or [email protected] for information on the class action. A class action lawsuit has already been filed. If you wish to serve as lead plaintiff, you must move the Court no later than March 13, 2023. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.
WHY ROSEN LAW: We encourage investors to select qualified counsel with a track record of success in leadership roles. Often, firms issuing notices do not have comparable experience, resources, or any meaningful peer recognition. Many of these firms do not actually handle securities class actions, but are merely middlemen that refer clients or partner with law firms that actually litigate the cases. Be wise in selecting counsel. The Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation. Rosen Law Firm has achieved the largest ever securities class action settlement against a Chinese Company. Rosen Law Firm was Ranked No. 1 by ISS Securities Class Action Services for number of securities class action settlements in 2017. The firm has been ranked in the top 4 each year since 2013 and has recovered hundreds of millions of dollars for investors. In 2019 alone the firm secured over $438 million for investors. In 2020, founding partner Laurence Rosen was named by law360 as a Titan of Plaintiffs’ Bar. Many of the firm’s attorneys have been recognized by Lawdragon and Super Lawyers.
DETAILS OF THE CASE: According to the lawsuit, defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose, among other things, that: (1) the purported agreement with Energy Storage Industries Asia Pacific (“ESI”) was in fact an undisclosed related party transaction because ESI was a de-facto subsidiary of ESS masquerading as third-party client; (2) ESS misled investors with their partnership announcement to signal business success to investors; and (3) as a result, Defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times. When the true details entered the market, the lawsuit claims that investors suffered damages.
No Class Has Been Certified. Until a class is certified, you are not represented by counsel unless you retain one. You may select counsel of your choice. You may also remain an absent class member and do nothing at this point. An investor’s ability to share in any potential future recovery is not dependent upon serving as lead plaintiff.
Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation. Rosen Law Firm was Ranked No. 1 by ISS Securities Class Action Services for number of securities class action settlements in 2017. The firm has been ranked in the top 4 each year since 2013. Rosen Law Firm has achieved the largest ever securities class action settlement against a Chinese Company. Rosen Law Firm’s attorneys are ranked and recognized by numerous independent and respected sources. Rosen Law Firm has secured hundreds of millions of dollars for investors.
Attorney Advertising. Prior results do not guarantee a similar outcome.
Despite its status as a leading video company, Vimeo, Inc. (NASDAQ:VMEO) has dropped more than 92% since its IPO in May 2021. Although VMEO has solid profit margins, I believe VMEO is a sell due to its growing trend of losing subscribers and declining average revenues per user (ARPU). While VMEO’s management is attempting to fix these issues – mainly by changing its pricing strategy into a per-seat model, I believe the stock is a sell unless a buyout materializes.
Overview
Since 2017, VMEO has been undergoing a business transformation process after appointing Anjali Sud as CEO as it failed in competing with YouTube in the video streaming platforms scene. For this reason, VMEO has been trying to position itself as a competitor in the B2B SaaS niche by focusing on catering to enterprise customers, while developing new video tools for small businesses. Although this niche is profitable thanks to the high demand for video tools by enterprises since the pandemic, I have a sell rating on VMEO given the company’s failure to convert more users into subscribers – especially for its enterprise offering.
Business Shortcomings
VMEO operates through a SaaS business model where the company uses a freemium pricing strategy. In this way, VMEO is mainly dependent on selling subscriptions to realize revenues. With that in mind, VMEO’s most glaring shortcoming in my opinion is its failure to convert its free users to subscribed customers. Taking VMEO’s user base of nearly 290 million, the company only has 1.6 million subscribers – including only 9500 enterprise customers. Since VMEO is looking to position itself in that niche, this failure to convert more users into customers is a major red flag since the company could now see declining revenues in 2023.
With that in mind, VMEO has been working to address this failure by improving its marketing efforts. For the nine months that ended September 30, 2022, VMEO reported $129.7 million in sales and marketing expenses compared to $110.1 million over the same period in 2021. Although this increased spending could positively impact VMEO’s ability to increase its subscribers over the long term, the company could find itself in a liquidity crisis given that it is not profitable. In fact, VMEO has only had one profitable quarter since its IPO in 2021 and is expected to continue posting net losses for the foreseeable future. On that note, VMEO appears to have noticed this risk since the company cut its sales and marketing expenses by 3%.
Monetization Model
VMEO changed its monetization model from a storage-based model to a per-seat-based model. This new model allows VMEO to realize more revenues since enterprises will now pay based on how many users are using its products instead of paying a small fee to access VMEO’s products. In the meantime, not all of VMEO’s enterprise customers pay based on the new model. However, all of VMEO’s customers will pay using this model when they renew their contracts. Considering that enterprises have large teams in size, this model should have allowed ARPU to grow in the right direction. However, this was not the case since VMEO reported underwhelming growth numbers for its key metrics which I will go further into shortly.
Meanwhile, the current macro environment of high inflation and a potential recession looming on the horizon could impact VMEO negatively since enterprises’ ability to pay for such services could be impacted. Moreover, there is a growing trend of enterprises reducing their workforce to weather the current economic situation. In this way, VMEO’s ability to generate revenues would be impacted as enterprises would pay for fewer seats. For this reason, my rating for VMEO is a sell because the company could be set for a major decline in 2023 – especially with the current recessionary environment.
Decelerating Growth In Key Metrics
Vimeo Investor Relations
Another red flag is VMEO’s decelerating growth rates in revenues, subscribers, and ARPU over the past year. Recently, VMEO shared its metrics for December that included worrisome figures as decelerating growth continued. The most notable metric was subscribers which saw a 5% decline YOY in December – continuing a 4-month trend. With the company now losing subscribers, it is not surprising to see revenues declining by 1% and 2% in November and December respectively. Despite these declines, VMEO’s ARPU remained flat MOM, however, it came at a mere 2% growth. This figure is concerning since VMEO is mainly looking to ARPU growth during its transformation. As VMEO is now losing subscribers at a growing rate, I expect ARPU to turn negative in the first half of 2023.
With that in mind, a large number of VMEO’s existing users have been shifting to its new per-seat pricing model. In this way, ARPU growth was supposed to increase over the past months according to VMEO’s forecasts. Since ARPU growth has continued to decelerate despite the new model, I believe VMEO’s business transformation plan has failed since ARPU continued decelerating throughout 2022.
In its Q3 earnings call, VMEO reiterated its expectations of decelerating growth in the first half of 2023 before accelerating in the second half of the year which would be driven by the enterprise offering. However, I believe that may not be the case in light of the growing decline in subscribers, revenues, and ARPU. As I expect this trend to continue moving forward, I remain bearish on VMEO’s outlook in 2023 unless the company reports continuous growth in its key metrics which appears to be a far-fetched possibility.
Competition
The video SaaS market is highly competitive and VMEO has to compete with several well-known platforms in this niche. Out of its competitors, Zoom (ZM) and Microsoft Teams (MSFT) hold a great market share which makes competition in this niche hard for VMEO since it offers the same features as both platforms. Additionally, users would be more inclined to use Zoom and Microsoft Teams as their brand recognition is much greater than VMEO.
Additionally, VMEO faces competition from other companies in the video editing software space as other companies are entering this market like Canva and Adobe (ADBE) who offer tools for video editing. Despite VMEO having an impressive repertoire of video editing tools, the company suffers from its lack of recognition in this space too as consumers would usually prefer using more renowned platforms like Canva and Adobe.
Conclusion
Despite its solid products and profit margins, I am bearish on VMEO’s prospects in 2023. VMEO is losing subscribers at a growing rate MOM which has led the company to lose revenues in November and December. In light of these declines, I expect ARPU – the company’s main focus during this transformation phase – to turn negative in the first half of 2023 which would mark the failure of VMEO’s prospects of becoming profitable.
Moreover, the current recessionary environment is a major risk to VMEO since the company’s subscriptions could rapidly decline as layoffs across companies increase. Since VMEO is adopting a per-seat pricing model, revenues should witness a steep decline YoY. Considering the spike in VMEO’s sales and marketing expenses to raise awareness of its offerings, these revenue declines could substantially impact the company’s liquidity given its mounting losses.
