A jack of all trades is a master of none but still better than a master of one. Troika Media Group, Inc. (Nasdaq: TRKA) is a professional services company tackling everything from marketing to brand creation. TRKA made a name for itself as an expert in the field, so much so that industry giants such as Amazon, Coca-Cola, and Nike became its clients. Recently, it caught the eye of multiple corporate entities interested in purchasing it – one of which is Genius Group Limited (NYSE American: GNS).
TRKA Stock News
Optimizing business operations though its digital media services, marketing services, and data analysis, TRKA has caught the eye of investors in the past thanks to its short squeeze potential. But its Q1 earnings show impressive revenue growth – indicating that its acquisition of Converge last year has paid off for the company.
Bidding War?
It appears that other companies are looking to capitalize on TRKA’s performance as well since the company shared that it “has received a number of bids for the sale or refinancing of the Company and is in process of evaluating those bids and is in the process of selecting a winning bidder”.
Pointing to its engagement with Jefferies LLC as its exclusive investment banking firm, TRKA says it has attracted several bidders and if it chooses to execute one or more transactions it can improve its balance sheet and reduce its debt servicing as well.
While the names of these bidders has not been disclosed, many investors are aware of the non-binding offer GNS sent TRKA at the end of March. While the tweet has since been deleted, the CEO of GNS, Roger Hamilton tweeted “Also Genius Group $GNS has sent to Troika Media a non-binding offer to acquire $TRKA together with a proposal on capital restructure. As agreed with @Jefferies terms are confidential. Offer approved by $GNS Board. Proceeding subject to $TRKA go-ahead (or not)”.
Since it is a non-binding offer, there is no guarantee that the deal will go through, but given TRKA’s statement in its earnings report, it seems that TRKA is considering GNS’ offer or one from a different entity.
Given the nature of this confidential offer, not much is known about GNS’ proposal to TRKA. But there are a number of reasons why GNS would consider acquiring the company. For one, TRKA excels at marketing, data analytics, and digital media buying therefore GNS could use its expertise to promote and improve its global educational platform. However, after TRKA beat expectations for Q1, these prospective bidders may have to pay a premium to acquire the company.
Impressive Q1 Earnings
Maintaining an impressive streak of record revenues for the fifth quarter in a row, TRKA reported $59 million in revenue – a 276% increase YoY. TRKA credited its ability to capitalize on the home services sector for its performance this quarter. But moving forward it hopes to maintain its revenue growth through customer acquisition programs as it capitalizes on demand in the legal and home services sectors. It also anticipates stronger demand as it approaches seasonally stronger periods in Q2 and Q3.
TRKA’s Biggest Problem
Despite increasing its revenue and gross profit YoY, TRKA reported an EPS of -$.032. The company appears to be hampered by its high cost of revenue which totaled $50 million for the quarter as well as its operating expenses. As a result, its total net loss was $7.9 million, still almost half of its net loss for the same quarter in 2022.
Overall, these expenses add up and in 2022 TRKA spent $45.2 million in selling, general and administrative expenses – roughly 39% of its revenues. If TRKA is not able to cut down on these expenses, it will still struggle to reach profitability. If it were to outsource some of its roles or seek other methods for cost reduction, then TRKA would be in a strong position to successfully scale.
Shelf Registration Statement
Due in part to these expenses, TRKA’s outstanding shares increased dramatically in March as a creditor exercised warrants to buy shares. Now that TRKA has filed a shelf registration statement, existing shareholders are at risk of further dilution.
This filing will allow TRKA to sell newly issued shares in portions over a period of three years without re-registering the securities. Thanks to this filing, TRKA can sell these shares during opportune moments such as after releasing bullish news.
Delisting Notice
Meanwhile, TRKA is also at risk of being delisted after trading below the minimum bid price of $1.00 for thirty consecutive business days. TRKA is currently attempting to appeal this decision and will request a hearing to do so. Therefore, a meeting will likely be held in the next 30-45 days to hear TRKA’s request.
TRKA Stock Reverse Split
In preparation, TRKA is actively preparing for a reverse stock split as soon as possible. According to TRKA’s Chairman Randall Miles, “The preservation of the Company’s listing with Nasdaq is critical to allow the Company to continue its growth trajectory and to build on our collaboration with Jefferies LLC to optimize the Company’s balance sheet and address its legacy capital structure, including redeeming its senior secured debt and to execute on strategic opportunities”.
The company believes that this reverse split will ultimately help it complete a transaction to reduce its debt service costs and optimize its capital structure.
TRKA Stock Financials
Looking at TRKA’s latest quarterly report, its total current assets increased QoQ from $155 million to $163 million while its cash on hand stands at $24.8 million. That being said, its total liabilities also increased from $124 million to $137 million. Meanwhile, TRKA has managed to decrease its operating expenses from $17 million to $13 million and its net loss decreased roughly 44% from $14.3 million to $7.9 million.
TRKA Stock Media Sentiment
@_TraderZero_ breaks down its plans for a long swing with TRKA stock
@TheNiz16 believes that TRKA is working to clean up its share structure – potentially in preparation for more progress
Technical Analysis
Overall, TRKA stock is trading in a sideways channel between $.27 and $.18. Currently trading below the 200, 50, and 21 MAs, the trend is bearish due to the NASDAQ’s delisting notice. Mixed sentiments regarding its reverse split have pushed TRKA stock down following its positive earnings.
Looking at the indicators, the RSI is neutral at 44 and the MACD is bullish. The 50 and 200 MA formed a golden cross earlier – signaling a trend shift. However, the shelf registration statement, delisting notice, and potential reverse split have created some uncertainty for investors.
TRKA Stock Forecast
Fundamentally, TRKA is growing its revenue at an impressive rate while it works to improve its balance sheet and reduce its debt servicing. As TRKA’ CFO shared, the company is addressing a complicated legacy capital structure and is working to restructure its pre-acquisition legacy businesses to improve efficiencies. With several bidders, TRKA could also reach a deal for the sale or refinancing of the company in the near future.
On the other hand, TRKA is at risk of being delisted and has plans to conduct a reverse stock split to maintain its NASDAQ listing. While this may ultimately help the company in a number of transactions, there will likely be a dip following the reverse split. Its worth noting that TRKA has a float of 374 million shares and the reverse split will likely make the stock much more volatile.
The shelf registration statement poses another risk to investors who have been diluted in the past. Therefore, investors should be mindful of the risks as TRKA makes progress towards its goals.
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