Q: Would comment on the fate of FDGE , mainly the errors an investor should not do, starting from IPO price that -for me-should have been a no-no. Any other similar stories as a lesson ?
5i Research Answer:
From a $17 IPO to a 34c stock in less than three years is of course a disaster. Fundamentals have not been good in that period, with lower revenue, losses and highly negative cash flow. The 'hype' on the initial listing was higher than we typically see. Debt was very high, and IPO proceeds paid down debt, leaving nothing for growth. The IPO valuation based on price/sales was exceptionally high. Cash flow has never been positive and in its entire public history only beat earnings estimates once. Generally, we do not like IPOs. We really do not like Canadian IPOs. We did not like the valuation, nor the negative cash flow. At listing, the company had not proven it could survive a downturn.