As a pure-pay cloud communications company, American Virtual Cloud Technologies, Inc. (NASDAQ: AVCT) provides cloud-based services to enterprises throughout the world through its cloud communications platform – Kandy. Although the company has major growth potential in this industry, AVCT stock is down more than 87% YTD due to the company’s worsening financials and dilution to raise capital. Despite this, AVCT stock has been landing on investors’ watchlists since the company shared its plan to explore selling its business or certain assets. With growing speculations that the company could be acquired by Microsoft in the near future, AVCT stock could be one to watch closely in case a buyout materializes.
AVCT Stock News
Kandy Platform
Since acquiring Kandy in late 2020, AVCT has been focused on growing this platform to become its core business in the future given its potential in providing service to major companies. Kandy is an intriguing platform as it offers proprietary Unified Communications as a Service (UCaaS), Communications Platform as a Service (CPaaS), Microsoft Teams Direct Routing as a Service (DRaaS), and SIP Trunking as a Service (STaaS). Through these white-label solutions, Kandy enables service providers, system integrators, partners, and developers to upgrade their applications and services with real-time contextual communications to improve user engagement.
Given that such services could be embedded into all companies’ applications and business processes, Kandy has been successful in attracting several major companies to use its services. In this way, AVCT has been able to strike strategic partnerships with industry leaders like AT&T, IBM, and Etisalat who Kandy already sells various solutions. Based on these partnerships, many investors believe AVCT stock could be extremely undervalued given that the company’s services are highly demanded.
Considering Kandy’s growth potential in its market, AVCT has been working to shift its business focus so that the platform becomes its core business. For this reason, AVCT sold its main division Computex Technology Group to Calian Group Ltd. for net proceeds of $32.1 million. Through these funds, AVCT was able to pay all of its debt then and further invest in growing Kandy. As Kandy has relationships with major companies in the telecommunications and technology sectors, this business direction could allow AVCT to secure a significant market share in its niche which could have a positive impact on AVCT stock price in the future.
With this in mind, Kandy has been growing at a substantial rate as the platform’s subscribers grew from 68 thousand to 412 thousand in 2021. At the same time, AVCT believes that Kandy’s services could attract additional subscribers since these services could make enterprises move away from legacy telephony and expensive infrastructure. In this way, AVCT could be well-positioned for financial growth as Kandy continues attracting enterprises to its services.
On that note, AVCT is confident in its prospects of securing a market share in the white-label cloud communications industry by capitalizing on its direct to enterprise capabilities to sell its services through its partners or directly. Considering the company’s partnerships with well-renowned companies like AT&T, IBM, and Etisalat, AVCT could be on track to attract new users which would significantly boost the company’s revenues. In light of this, AVCT stock could be worth investing in at its current PPS.
New Management
Although the company’s platform is a major success in its market, AVCT has been struggling financially and had to dilute its shares to raise capital – leading AVCT stock to plunge more than 80% YTD. As a result of these woes, AVCT is undergoing an overhaul of its BOD and management team. As part of this overhaul, AVCT named Kevin Keough as its new Chief Executive Officer effective September 1 after Michael Tessler stepped down from the company’s board.
Keough is expected to add value to AVCT in his new role given his extensive experience in public companies. With this in mind, Keough has already been at AVCT since last April as its Chief Transformation Officer and has previously served as a partner with McKinsey & Company Inc as well as a senior executive with FirstEnergy Corp. With many investors bullish on the company’s future prospects under Keough’s leadership, AVCT stock has been witnessing strong movement in pre-market as Keough prepares to start his new role today. Based on this, AVCT stock could be one to watch this week as it could replicate its recent runs.
Potential Buyout
Meanwhile, many investors are bullish on the company’s new strategic view that includes selling the company or certain assets. To facilitate this view, AVCT retained Northland Capital Markets to advise it on this view which could help the company overcome its financial woes. Considering that the company’s platform – Kandy – could disrupt its industry, investors are speculating AVCT could be bought out by IBM thanks to both companies’ relationship. In that case, AVCT shareholders could realize major gains since a buyout usually includes the acquiring company to purchase the target’s shares at a significant premium to ensure that a deal takes place. For this reason, AVCT stock could be one to hold until a buyout materializes.
NASDAQ Notices
Despite this, investors should be wary that AVCT stock faces the risk of being delisted as the company is not in compliance with the NASDAQ minimum bid price rule. As a result, the company has until November 16 to regain compliance to maintain a bid price of $1 for 10 consecutive days. With this in mind, AVCT has its shareholders’ approval to effect a reverse split by September 30 to regain compliance with the NASDAQ listing rule.
At the same time, AVCT is not compliant with the NASDAQ Minimum Value of Listed Securities (MVLS) requirement since the company had an MVLS of less than the required $35 million for 30 consecutive days. AVCT has until January 23, 2023 to regain compliance with this rule by maintaining a closing MVLS of at least $35 million for 10 consecutive days at least. In spite of these risks, AVCT stock could be an opportunity for major gains if the company is indeed bought out in the future.
Short Data
As the company is struggling financially, AVCT stock is witnessing a growing short selling activity which could rally a short squeeze if investors are holding the stock. In the meantime, AVCT has a short interest rate of 25.9% and 38.7% of the float is shorted. Moreover, utilization rate is 100% and cost to borrow is increasing significantly with it currently at 115.9%. While a short squeeze may not occur, AVCT stock could be one to watch in light of its short data.
*Updated September 28th
Buyout Rumors
Currently, AVCT is grabbing investors’ attention with growing speculation that the company could be acquired by Microsoft Corporation (NASDAQ: MSFT) which is looking to grow its hybrid cloud network. On that note, MSFT acquired AT&T’s cloud network technology earlier this year to position itself in this growing industry. Meanwhile, adding AVCT’s platform – Kandy – under its umbrella could help MSFT widen the gap with its competitors in the cloud computing communications industry. In addition, acquiring AVCT would allow MSFT to take over all of the company’s customers as well as receiving AVCT’s services without paying since MSFT is already a customer of AVCT. For this reason, many investors are confident a MSFT acquisition could be right around the corner.
On that note, Ribbon Communications Inc. (NASDAQ: RBBN) has recently filed a form 13D/A disclosing its ownership in AVCT as the company was issued 13 million shares by AVCT for the acquisition of Kandy. In that form, RBBN disclosed that it does hold any position in AVCT stock – making the company free from its debt. As a result, AVCT could be acquired as it has no outstanding debt. Meanwhile, MSFT has previously shared that it is set to upgrade its Azure cloud services by October 1 while RBBN’s form 13D/A was filed on September 21. Based on this, MSFT has 10 days or until October 1 to file a form 13D/A if it acquired more than 5% of AVCT’s shares. Since this date is approaching, AVCT stock could be one to watch closely this week in anticipation of the news.
Despite the potential profits that investors would receive from their investments in AVCT if a buyout materializes, the company remains a risky investment. So far, AVCT is yet to be compliant with the NASDAQ minimum bid price requirement. With this in mind, AVCT has until September 30 to effect a reverse split to regain compliance. If a reverse split takes place, this could be a bearish sign for investors hopeful of a buyout. However, if the company does not effect a reverse split this week, AVCT stock could soar as a buyout could be approaching.
AVCT Stock Financials
Looking into AVCT’s financials, the company witnessed a steep decline in assets as the company reported $33.5 million compared to $117.9 million in Q4 2021. This decline could be attributed to the company divesting its Computex division. However, AVCT’s cash balance also decreased substantially from $31.1 million to $13.1 million. With this in mind, this decline is mainly the result of the company paying off all of its debt following the sale of Computex. As a result, AVCT reduced its liabilities to $35.5 million compared to $117 million in Q4 last year.
As for revenues, AVCT reported $3.7 million which is a decline from the $4.9 million reported a year ago. Despite the revenue decline, AVCT managed to report a net income of $8.3 million thanks to the company reporting $33.5 million as a change in fair value of warrant liabilities. While the company’s financials are declining, AVCT could show better results in the coming quarters if Kandy continues witnessing high demand for its services.
Media Sentiment
@ChaseMacTrades is confident AVCT stock could soar this week amid speculation of a buyout.
@theresa_perrin is bullish on AVCT’s prospects of being acquired by Microsoft.
Technical Analysis
AVCT stock is currently trading at $.31 and shows resistances near .3113, .4243, and .5187. Meanwhile, the stock shows supports at .24, .1646, and .1320. With many investors speculating that the company could be acquired by Microsoft soon, AVCT stock has the potential to rally on high trading volume. AVCT has retested its VWAP resistance multiple times and failed to break through. With this in mind, AVCT stock is down in premarket which could be an opportunity for bullish investors to accumulate shares at a lower PPS.
Despite the speculations regarding a potential buyout, accumulation is trending downwards and the MACD is bearish which could be due to investors taking profit after the stock’s recent 96% run. Meanwhile, the RSI is holding at 52 which could signal a strong movement in either direction if enough volume is there. In light of these indicators, AVCT could be poised to run in the near-term especially if news regarding a buyout is released. As for its share structure, AVCT has an OS of 126.6 million and a float of 90.6 million.
AVCT Stock Forecast
While the company is a risky investment, AVCT stock could be an opportunity to realize gains for investors if a buyout materializes. With many investors confident that the company could be acquired by Microsoft, AVCT stock could soar in anticipation. With this in mind, investors are speculating Microsoft could file a form 13D/A disclosing its ownership of AVCT on October 1 since the tech giant intends to upgrade its Azure cloud services by October 1. For this reason, AVCT stock could potentially soar this week in anticipation of news about a potential buyout.
As these speculations may not materialize, investors should be wary that AVCT faces the risk of delisting from the NASDAQ since the company is yet to regain compliance with the NASDAQ minimum bid price requirement. On that note, AVCT has until September 30 to effect a reverse split to regain compliance with the NASDAQ requirement. This date could be pivotal for AVCT shareholders as it could define whether a buyout is taking place or not. In light of this, AVCT stock is one to watch closely this week for more updates.
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