LGIQ: Logiq to Buy Rebel AI for $8.1 Million in Cash and Stock
OTC:LGIQ
READ THE FULL LGIQ RESEARCH REPORT
On March 3, 2021, Logiq (OTC:LGIQ) filed an 8K that announced it would buy Rebel AI, Inc. for $8.126 million comprised of $1,126,000 in cash and $7 million in stock. The deal is expected to close in the next few weeks at which point the company will issue a press release and hopefully provide further financial information on Rebel. Rebel AI is a six-person ad tech company founded in 2016 based in Boulder, Colorado that just launched its demand side platform (DSP) in January after four years of development. While it has only started to generate revenues, Logiq is optimistic that the acquisition will be accretive this year. Rebel AI should provide much higher gross margins than the DataLogiq average, and that margin is expected to increase again significantly in 2022. Assuming the company paid at most ten times 2021 revenues it should contribute near $1 million in revenues in the next 12 months. Logiq is keeping all of its employees and maintaining the Colorado location.
The Rebel AI platform provides the ability for small and medium sized agencies and brands to economically and easily create optimized omnichannel (display, social, native, apps, & CTV) ad campaigns for their clients and products. It will offer similar capabilities as The Trade Desk but with an easier to use interface, lower cost and with ad fraud weeded out improving returns. It will also interoperate with “walled garden” platforms such as Facebook, Twitter ad platforms, and the like. A very important factor is cost. Many smaller operations cannot reach the minimums required by Google DV360 and Trade Desk to use all the bells and whistles, which can be in the millions per month. Rebel is much more affordable.
This platform will bring the advertisers’ data in-house and will allow buyers to spend across all platforms rather than be restricted by the walled gardens of those such as Facebook / Instagram, Twitter, and Amazon. Rebel’s customers will no longer need multiple contracts with multiple vendors to buy ads in different places and their buys will be cost optimized to get the most bang for the buck. More importantly, the advertiser will own its own data, which can be used to analyze ad inventory wherever it resides. In the future cookie-less world, owning your own data becomes very important to advertisers since all information generated by Facebook or Google ads are owned by them and is unable to be used elsewhere. The Rebel platform is to be seamlessly integrated with Fixel’s capabilities in retargeting further improving results. Once Fixel capabilities are built-in the company plans to rebrand the business “Logiq Digital Marketing.”
Rebel has already signed ten customers and is starting to generate revenues. At first it will be pursuing only ad agencies. After doing a demo of its easy to use interface, the company will run a 15 to 30 day test for prospective clients and always out performs the customer’s current solution while providing better feedback and data. As a newly build platform, it is also speedier and advertisers can start seeing results from a campaign within seconds rather than waiting the 20 hours it takes to get information from a Google campaign. As a user, it just takes less time and effort than the legacy solutions currently available. That in itself has made prospects sign on. The Trade Desk product is now pushing eleven years old and its interface and architecture show it.
On Jan. 27, 2021, Logiq filed a preliminary prospectus in Canada for a proposed IPO of units. We expect that these units could raise between $6 and $7 million. Each Unit consists of one share and one warrant. Logiq recently submitted its application to list its common shares (including the unit and warrant shares) on the NEO Exchange in Canada. We expect the deal to be completed the week of April 1st. Upon listing on the NEO, Logiq’s common shares will continue to be traded in the U.S. on the OTCQX Market as LGIQ.
Once the deal closes, we will update our model to include the effect of Rebel AI. The IPO financing should close shortly thereafter and then those units will be included as well. There are currently 16.3 million shares outstanding and after the acquisition and financing that number could be 18.7 million.
Versus other companies in its space, Logiq is undervalued. It currently trades at $96 million market cap or 2.5 times estimated 2020 sales of $38 million. Its peers trade at blended 18.2 times.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks provides and Zacks receives quarterly payments totaling a maximum fee of $40,000 annually for these services. Full Disclaimer HERE.