Jose Martinez Calderon
What Is Ultimax Digital?
New York, NY-based Ultimax Digital, Inc. (NFTX) was founded to create payment technologies for video games and has since pivoted to focus on NFT production and a marketplace.
Management is headed by Chairman and CEO Jesse Sutton, who has been with the firm since 2021 and was previously CEO of Majesco Entertainment and president of Global Bit.
The company’s primary offerings include:
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Ultimax Marketplace
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Toolkit
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Game Studio
As of June 30, 2022, Ultimax has booked fair market value investment of $2.6 million in equity and debt as of June 30, 2022 from investors including Aurora 1 Equity Trust, Gideon 718 Equity Trust, Robin Equities Irrevocable Trust and Level Up Revocable Trust.
According to a 2022 market research report by SkyQuest Technology, the global market for NFTs was an estimated $15.7 billion in 2021 and is forecast to reach $122 billion by 2028.
This represents a forecast CAGR of 34.1% from 2022 to 2028.
The main drivers for this expected growth are a rising demand for digital artworks, both visual and audio, growing awareness of the technology among a wider group of consumers and easier access to information and purchasing capabilities.
However, the growth in the market has been notably volatile, with strong growth in the summer of 2021 followed by a sharp drop in interest by the summer of 2022.
Major competitive or other industry participants include:
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Coinbase
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OpenSea
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Larva Labs
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Cloudflare
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Dapper Labs
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Binance
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Others
Ultimax Digital’s IPO Date & Details
The initial public offering date, or IPO, for Ultimax has not yet been announced by the company.
(Warning: Compared to stocks with more history, IPOs typically have less information for investors to review and analyze. For this reason, investors should use caution when thinking about investing in an IPO, or immediately post-IPO. Also, investors should keep in mind that many IPOs are heavily marketed, past company performance is not a guarantee of future results and potential risks may be understated.)
Ultimax intends to raise $11.25 million in gross proceeds from an IPO of its common stock, offering 2.5 million shares at a proposed midpoint price of $4.50 per share.
No existing shareholders have indicated an interest to purchase shares at the IPO price.
Assuming a successful IPO, the company’s enterprise value at IPO would approximate $76.8 million, excluding the effects of underwriter over-allotment options.
The float to outstanding shares ratio (excluding underwriter over-allotments) will be approximately 13.5%. A figure under 10% is generally considered a “low float” stock which can be subject to significant price volatility.
Management says it will use the net proceeds from the IPO as follows:
We currently intend to use the net proceeds we receive from this offering for general corporate purposes, including growth capital, working capital, operating expenses, hiring, potential acquisitions, repayment of those convertible notes which are not converted into common stock by holders, and capital expenditures.
(Source – SEC)
Management’s presentation of the company roadshow is not available.
Regarding outstanding legal proceedings, management said the firm is ‘not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding.’
The sole listed bookrunner of the IPO is WestPark Capital.
How To Invest In The Company’s Stock: 7 Steps
Investors can buy shares of the stock in the same way they may buy stocks of other publicly traded companies, or as part of the pre-IPO allocation.
Note: This report is not a recommendation to purchase stock or any other security. For investors who are interested in pursuing a potential investment after the IPO is complete, the following steps for buying stocks will be helpful.
Step 1: Understand The Company’s Financial History
Although there is not much public financial information available about the company, investors can look at the company’s financial history on their form S-1 or F-1 SEC filing (Source).
Step 2: Assess The Company’s Financial Reports
The primary financial statements available for publicly-traded companies include the income statement, balance sheet, and statement of cash flows. These financial statements can help investors learn about a company’s cash capitalization structure, cash flow trends and financial position.
My summary of the firm’s recent financial results is below:
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The company’s financials show no revenue over the past few years and significant operating expenses.
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Free cash flow for the six months ended June 30, 2022, was negative ($861,643).
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The firm currently plans to pay no dividends on its capital stock and intends to reinvest any future earnings back into the firm’s growth and operational requirements.
Step 3: Evaluate The Company’s Potential Compared To Your Investment Horizon
When investors evaluate potential stocks to buy, it’s important to consider their time horizon and risk tolerance before buying shares. For example, a swing-trader may be interested in short-term growth potential, whereas a long-term investor may prioritize strong financials ahead of short-term price movements.
Step 4: Select A Brokerage
Investors who do not already have a trading account will begin with the selection of a brokerage firm. The account types commonly used for trading stocks include a standard brokerage account or a retirement account like an IRA.
Investors who prefer advice for a fee can open a trading account with a full-service broker or an independent investment advisor and those who want to manage their portfolio for a reduced cost may choose a discount brokerage company.
Step 5: Choose An Investment Size And Strategy
Investors who have decided to buy shares of company stock should consider how many shares to purchase and what investment strategy to adopt for their new position. The investment strategy will guide an investors’ holding period and exit strategy.
Many investors choose to buy and hold stocks for lengthy periods. Examples of basic investing strategies include swing trading, short-term trading or investing over a long-term holding period.
For investors wishing to gain a pre-IPO allocation of shares at the IPO price, they would “indicate interest” with their broker in advance of the IPO. Indicating an interest is not a guarantee that the investor will receive an allocation of pre-IPO shares.
Step 6: Choose An Order Type
Investors have many choices for placing orders to purchase stocks, including market orders, limit orders and stop orders.
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Market order: This is the most common type of order made by retail traders. A market order executes a trade immediately at the best available transaction price.
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Limit order: When an investor places a buy limit order, they specify a maximum price to be paid for the shares.
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Stop order: A buy-stop order is an order to buy at a specified price, known as the stop price, which will be higher than the current market price. In the case of buy-stop, the stop price will be lower than the current market price.
Step 7: Submit The Trade
After investors have funded their account with cash, they may decide an investment size and order type, then submit the trade to place an order. If the trade is a market order, it will be filled immediately at the best available market price.
However, if investors submit a limit order or stop order, the investor may have to wait until the stock reaches their target price or stop-loss price for the trade to be completed.
The Bottom Line
NFTX is seeking U.S. public capital market investment to fund its proposed growth plans and possibly to pay down convertible promissory notes.
The market opportunity for providing various NFT-related services is large and expected to grow substantially into the future as consumers seek various types of digital assets and objects secured by blockchain technologies.
WestPark Capital is the lead underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (49.0%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.
The primary risk to the company’s outlook is its lack of revenue history and heavy competition from major market players that have already gained significant market share in network effect industries.
As for valuation, management is asking investors to pay an enterprise value of around $77 million for a company with no revenue history.
Thus, the NFTX IPO is highly speculative as management hasn’t produced any revenue.
While the IPO may attract day traders seeking volatility, I’m on Hold for it.
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