GTII

Global Tech Industries Group, Inc.

0.6490
USD
-22.28%
0.6490
USD
-22.28%
0.4330 8.9700
52 weeks
52 weeks

Mkt Cap 204.84M

Shares Out 245.32M

Chat
Send me real-time posts from this site at my email

Global Tech Industries Group Looks Overvalued Based On Fundamentals Once Again

Summary The company had no revenues in Q2 2022, and its tangible assets barely surpassed $0.5 million as of June. Yet, its market valuation has increased by over 500% since September 21 and there is no clear catalyst behind this move. In my view, this creates a window of opportunity to open a small speculative short position as large share price increases for this stock have been short-lived. However, there are no call options available and the short borrow fee rate currently stands at 38.75% so it could be best for risk-averse investors to avoid GTII. Looking for a helping hand in the market? Members of Bears and Resources get exclusive ideas and guidance to navigate any climate. Learn More » Introduction In April 2021, I wrote a bearish article on SA about Global Tech Industries Group (OTCQB:GTII) in which I said that it looked like one of the most overvalued companies I've come across in my investment career as its market valuation was over $600 million while its total assets were $44,470. I was surprised to find GTII among the most traded stocks on the OTC market over the past few days and its market capitalization has soared to $785.3 million as of the time of writing. Overall, I think that GTII’s business ventures haven’t performed well over the past 18 months, and that this could be a good time to open a small short position. Let’s review. GTII can be described as a small conglomerate and when I took a look at the company in April 2021, it had recently inked deals for the purchase of a gold trader (Gold Transactions International), a telecommunication services provider (Jabber Telecom), a full scope optometry solutions provider (Bronx Family Eye Care), and a non-fungible token (NFT) marketplace (through a deal with Ronald Cavalier, the founder of Cavalier Galleries). It seems the deal for Jabber Telecom fell through as there is no mention of this company in GTII’s financial reports for the past few quarters. Bronx Family Eye Care was bought in December 2021, but the parties later concluded that it was in their mutual best interests to unwind the acquisition. GTII issued 4,150,000 shares for this purchase and I expect those to be canceled in the near future. Turning our attention to the NFT deal, GTII purchased two pieces of art for eventual digitization for a total of $67,845. GTII mentioned in its Q2 2022 financial report that it plans to distribute NFTs to shareholders as a dividend, but I doubt there is much value here as the interest in this asset class has decreased significantly over the past months. According to data from Dune Analytics, the global NFT trading volume stood at $470 million in September 2022, which represents a decrease of 97% over a period of 9 months. According to GTII’s Q2 2022 financial report, the purchase of Gold Transactions International was closed in June 2022 and the company assumed a license that gives it access to a network that buys gold from artisan miners internationally and then provides transportation, assaying, refining and storage services to a free trade zone in Dubai. This license was valued at $12.9 million and GTII issued 6 million shares and assumed debts of $4.97 million as part of the deal. However, I’m concerned that the company overpaid here as the new subsidiary had revenues of just $0.13 million and a net income of $0.07 million in 2021. Furthermore, Gold Transactions International is currently a wholly-owned subsidiary of GTII but the latter didn’t have a single dollar of revenue in Q2 2022. Turning our attention to GTII’s balance sheet, I think the situation continues to be challenging as the Gold Transactions International license accounted for over 96% of the total assets as of June 2022. Cash was just $0.35 million while current liabilities stood at $3.26 million as of the end of the quarter. In addition, the long term liabilities include a $4.84 million note payable related to Gold Transactions International. Yet, GTII’s market valuation has soared over the past few days and stands at $785.3 million as of the time of writing. So, what is the reason behind this move? Well, the most significant recent event was on September 14, when GTII announced the purchase of a legal marketing company named Wildfire Media Corp through the issuance of 100 million shares. The transaction includes an earn-out payable if Wildfire achieves $25 million in revenues and $85 million in receivables which implies that this isn’t a large company. Overall, I doubt this acquisition is the catalyst for GTII’s significant share price increase as the trading volume started soaring on September 21, which is a full week after the deal became public. In my view, the share prices of microcap companies can increase for spurious and unknown reasons, and we’ve seen this happen with this stock several times over the past several years. Historically, these large share price increases have been short-lived as the fundamentals just aren’t there and I think this time is unlikely to be different. In my view, this creates a window of opportunity to open a small speculative short position. According to data from Fintel, the short borrow fee rate currently stands at 38.75%. The risk for a short squeeze seems low as the short interest is just 0.24% of the float and it takes only 0.08 days to cover at the moment. Looking at the risks for the bear case, I think the major one is that there is no clear reason behind the recent share price increase of GTII which means that it’s impossible to predict how high the market capitalization can become. One example that comes to mind is Athena Bitcoin Global (OTCPK:ABIT), whose market valuation had climbed above $130 billion when I covered it on SA in September 2021. Unfortunately, there are no call options available for GTII, so you can’t hedge this risk. Investor takeaway GTII had no revenues in Q2 2022, and its tangible assets barely surpassed $0.5 million as of June. The company’s fundamentals don’t look much better compared to April 2021 and I don’t expect them to change much in the near future. I think it's likely GTII’s share price will decline back below the $1.00 level in the near future as the increase in the market valuation seems unjustified from a fundamentals point of view. However, I find it impossible to predict how high the share price can get and there are no call options available so I think investors should limit the size of any short positions. For risk-averse investors, I think it could be best to avoid this stock. If you like this article, consider joining Bears and Resources. I post my portfolio and shortlist there and you can also find exclusive ideas from our community of investors. I like to focus on undervalued companies that the market is ignoring, like an island of misfit toys. Both long and short ideas. So, what can you expect to get from this service? Exclusive articles Access to my portfolio and watchlist Interviews, ideas, portfolios, watchlists, and comments from other investors I've invited to the service A chat room with access to me and the other investors This article was written by I have been investing in stocks for 13 years now, most of the time in my native Bulgaria. I have a bachelor's degree in Finance and a Master's degree in International Business and I like reading Pratchett and Michael Lewis. Regarding the opportunities that I cover, please take into account that I'm an admirer of legendary fund manager Peter Lynch so I tend to follow a lot of his investment philosophy. - Disclosure: I am not a financial adviser. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading. Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: I am not a financial adviser. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading. Comments (2)

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue