Hi folks,
Not sure if SKLZ is still followed on this board. I just remember coming across this company on this board few months back due to high revenue growth.
I haven’t personally invested in this stock, but it has plummeted 50% over the last month so I started to do some research to see what’s causing all this and whether its worth investing in this company.
Few reasons came across were:
- Another Public Offering at $24/share so naturally investors don’t want to pay more for their share.
- Revenue growth declining
Full-year revenue 2018-$17M 2019-$51M 2020-$120M 2021-$225M 2022-$366 2023-555M , which means going from 200%YOY in 2018 to 55%YOY in 2023,
52% is still pretty reasonable so I researched further.
And while doing so, I came across this report from Eagle Eye Research.
https://drive.google.com/file/d/1AZLcuomm5cjZWQCxA4uud3FUl8d…
The report is detailed with several references, but in a nutshell, the report speaks to few topics of concern:
- “Revenue-RoundTripping” - Company’s Revenue is not actually the revenue that new/existing clients bring but also the “Bonus” cash deals that Skills provide to their users as incentives. This is essentially non-cash “virtual money” thats presented in Revenue but also recorded as S&M, so technically a net-zero effect, but the revenue numbers look staggering plus also the liability owed to the customers is real and must be funded somehow
- Based on the Bonus structure - The company’s business model is bound to loose money always and need regular investor funding or continuous client inflows.
- The Valuation itself is based the Revenue #s that aren’t “True” Revenue, so if they look at true revenue, which according to the report is Gross Deposits from Clients net withdrawals & Developers share (approx 5%) should be the true revenue. Even if we say that the Developer’s cut can be some form of Expense, the revenue is still significantly lower than reported.
Now hoping the geniuses on this board can help clarify:
- The report itself is anonymous but presents a lot of references of SEC and 10-K, S-1 reports, etc. So question I have is that, could all this even be allowed by SEC of a publicly traded company?
- Currently several funds own SKLZ (like ARK) or I think even MF SA recommended this stock(could be wrong here as I don’t have SA, just RB) - So wouldn’t all these investment firms with countless analysts/accountants catch this type of “Revenue Round-Tripping”?
Anyways I am always learning lots from this board so hoping one of you can chime in. Or also advise how I can fact check this type of stuff better. Considering this “Anonymous” report group have shorted the stock also, so could very well be to fuel this sell-off.
Thanks