I’ve seen a lot of people discussing out there why SIRC hasn’t really taken off. Namely, they dropped a casual 370% top line growth quarter, and the share price has barely moved since then. At the same time, we saw the share price explode last year without nearly as much financial growth. What gives?!
Today, I want to discuss the reasons why I think we haven’t seen the level of share price we all expected after the huge quarter. I also want to debunk many of these as some are pretty invalid concerns, in my opinion.
Reason 1: Unaudited Financial Statements
SIRC has only completed audited financial statements as of the year-ended 2/28/2021 but has released quarterly unaudited statements up until 11/30/2021 (the big quarter). Our next round of audited financial statements are supposed to be coming out by the end of March, but those will be for the entirety of calendar year 2021 (as I understood it). So a bit of overlap with the prior filing.
We will then be moving fully into the new calendar year-end. So we’d expect our next filing after that to be January, February, March quarterly filing by mid-May.
All in all, I think some people are a bit hesitant because that massive Q3 report was not audited. Personally, I give this one like a 75% unfounded concern. It is objectively not audited, which always means that there is some level of risk. I get it. There are also some things they don’t explain the best in the unaudited quarterly report, like C and D Series Preferred Shares.
But in general, although unaudited, I think their reporting is generally pretty high quality. There is some absolute unaudited garbage on the OTC riddled with spelling errors, draft notes, handwritten notes, etc. This is probably about as good as you can get unaudited.
So it’s a concern, but not a big one in my opinion. I give it low weight.
Reason 2: Uplisting Delays
We all were expecting better news when the Q&A dropped on March 7th regarding the uplist. It appears the company is still a little ways off from the QB uplist. Most of us expected that to happen already.
Dave did not give a firm timeline on the QB, he said they were still working through some line items on their financial statements. Once those are done, they will file with OTCMarkets to join the QB. I suspect that the filing will happen very near to the next audited financial release, so sometime near the end of March.
They are also now skipping the QX, which I think is an awesome idea. It seemed like a waste of time to me personally, and I think they thought the same.
They are then planning to file to go onto the NASDAQ basically immediately after uplisting to the QB. The plan is to uplist in about four months to the NASDAQ, which would put it at around a July time frame. With the July 4th holiday, I think it may not happen until mid-late July, but who knows!
So, are these uplisting delays an issue? Sort of, but not really.
The delays themselves kind of suck, I think we all expected quicker movement. But coming from public accounting, these types of things are likely pulling teeth while trying to herd a pack of cats. It just takes forever, it’s painful, and nobody likes it. Plus, SIRC is ever-changing and growing into newfound success. So it makes it all the more difficult.
Honestly, I’m willing to be very patient with them on the uplists. It’ll happen when it happens, I’m sure it’s all progressing as fast as it can. So personally, the timing is not an issue.
The one issue I have is that sometimes SIRC can be weirdly illiquid. I talked about it in other articles. But for a company of its size and notoriety, SIRC has some odd dry spells of liquidity. It still has those OTC jitters of someone unloading a position and it tanks the stock, or vice versa. None of which is great long term.
So from a pure stability perspective, I think it’s a minor issue that they’re not uplisting faster. But again, that’s more of a day-to-day trading issue, not a fundamental company issue.
Overall, this is a low weight concern for me.
Reason 3: Reverse Split
This should be common knowledge to the die-hard SIRC readers, but SIRC is almost certainly going to reverse split as it uplists to the NASDAQ. The company must have a consistently active bid price of at least $4 leading up to the uplist. As SIRC is currently sitting at around 0.30-0.35, we’re clearly a long ways off.
Dave even hinted at this on the most recent Q&A… so it’s coming in my opinion.
Now, is that a legitimate concern? As my readers already know… OF COURSE I DON’T THINK IT IS!
I can’t keep writing about this without wanting to blow my brains out…so I’ll leave it at this. If you’re investing in a quality company, you shouldn’t give a shit about a reverse split. It means literally nothing. If you’re gambling and investing in a scam company, then you can be worried about a reverse split.
Period. End of Story. This is a non-issue.
Reason 4: Capital Structure Needs Cleaning Up
We all know SIRC has gone to extraordinary lengths to clean up its capital structure over the last twelve months or so. They’ve bought back shares, settled warrants, bought out convertible debt… you name it, they’ve done it. I cannot applaud them enough for their work there.
However, the job is not yet done. Before they uplist to the NASDAQ, they need to un-OTC their company. What do I mean by that? Basically, as a non-REIT/LP, the majority of their ownership/investment structure should ideally be common stock and debt, that’s it. They need to buy out most of the Series B Preferred Shares and the convertible debt. From what I understand, the warrants are gone.
Lucky for us, Dave has said that once the Arbiter money comes in and a few more acquisitions are completed, the primary goal is share buybacks (likely the Preferred B’s) and negotiating the buyout of convertible debt. He said 20-25m shares, which is like 2-2.5m Series B Preferred Shares out of the 8m shares. So a nice chunk is in the works to be bought out I’d suppose, in addition to the convertible debt. But the convertible debt is not significant from a stock conversion perspective.
So yes, some people might be put off by some of the “OTC-esque” funding methods they’ve used. But all of that is being cleared up. For those of you that follow ALPP, they did the exact same thing as they uplisted. I think will SIRC do the same over the next 6-12 months.
I will therefore label this as a non-issue, but something to keep an eye on.
Reason 5: Arbiter Money
I think this is probably the biggest elephant in the room. We’ve been hearing for months that SIRC has negotiated an incredible debt package of $42m at a 4.50% interest rate which is insanely good. There have been delays on this and we all expected it to be complete by now. This also holding up five acquisitions which would bring immediate cash flow to the company.
Needless to say, I’m thinking we’re all a bit annoyed by these delays. Am I worried about it?
Honestly, a little, but not really.
First, the CEO has been very transparent about the whole thing. He basically said that the Arbiter guy has been slow and over promising, which I believe. These types of things are also like herding cats, so maybe the guy is just a bit of eager with how he promises deadlines. But we haven’t seen the CEO ducking questions about it or sweeping it under the rug.
As an anecdote, I followed another OTC very closely which went through a very similar thing to SIRC. That company, however, acted about as sketchy as possible when it didn’t go through and basically just swept it under the rug and it was never mentioned again. I wrote them off as a scam.
The fact that SIRC has been facing this head on and providing constant updates makes me less worried about it.
Second, the deal is just so good for SIRC that it sort of squashes a lot of the concerns with the delays. The fact that this is almost certainly happening is just such a good thing for the company that personally I don’t care that much about the delays.
So all in all, I give this low-medium weight. But even then, I’m not really concerned.
Reason 6: Miscellaneous Nonsense
These are a few concerns I’ve heard that are very farfetched. So I’ll save my metaphorical breath talking about them:
- Unsustainable revenue – come on… this is an extremely high growth industry and SIRC has positioned itself as a premier distributor, seller, installer… what else do you want.
- Unsustainable profitability – I talked about this ad-nauseam. Yes, profitability from Q3 likely won’t last. But top line growth is projected to be so high that it will more than cancel out. We’re expecting 100m revenue quarters starting in Q2 (assuming Arbiter/acquisitions), so not an issue in my opinion.
- Lawsuits – First, SING is an extremely sketchy and failing company. So let’s get that out of the way. In terms of Cornerstone, I have low expectations for what SIRC can get back. But I don’t care either way, it’s not super material. But people thinking that SIRC is somehow scammy because of these lawsuits is just silly.
There we have it! In the end, I’m not really concerned about any of these in particular. Other than the regular risks of doing business not mentioned here, I am fairly confident that all of these points should be remedied in due time. So I’m still firmly long on SIRC.
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DISCLAIMER – AT THE TIME OF WRITING THIS ARTICLE I DO NOT HAVE A POSITION IN $SIRC. THIS ARTICLE IS NOT FINANCIAL ADVICE AND IS INTENDED ONLY FOR EDUCATIONAL PURPOSES. I AM NOT A FINANCIAL ADVISOR. AT THE TIME OF WRITING THIS ARTICLE, PERSONS AFFILIATED WITH THE COMPANY ANALYZED ABOVE MAY BE PROVIDING MONETARY COMPENSATION AS MONTHLY PATRONS THROUGH MY PATREON. THIS COMPENSATION IS NOT PROVIDED IN RETURN FOR ANY SERVICE, WRITING ABOUT A PARTICULAR TOPIC, AND/OR FAVORABLE OR UNFAVORABLE OPINIONS. MY PATREON SUPPORTERS HAVE NO INFLUENCE ON THE CONTENT OF MY ARTICLES.