MGO Global Targets US $7.5 Million IPO (MGOL)

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A quick look at MGO Global

MGO Global (MGOL) has filed to raise $7.5 million in an initial public offering of its common stock, according to an S-1 registration statement.

The company operates the licensed Messi brand from sporty clothing, accessories and home accessories.

While the company shows promise due to the licensing of the Lionel Messi brand, management hasn’t shown it can in any way increase sales based on the company’s past results.

MGOL IPO is highly speculative so I’m waiting for it.

MGO overview

Based in Fort Lauderdale, Florida, MGO Global was formed to acquire and operate a portfolio of lifestyle brands owned by notable personalities.

Management is led by Co-Founder, Chairman and CEO Maximiliano Ojeda, who has been with the company since its inception in 2017 and previously held senior positions at various real estate development organizations.

The company’s main offerings include:

• dress

• Accesories

• home decor

As of September 30, 2022, MGO has booked $4.1 million in investments from investors at market value.

MGO – customer acquisition

The company sells its licensed products through an online storefront and through its mobile apps on the Messi Store.

MGO relies on social media and digital marketing tools on major social networks.

Selling expenses as a percentage of total sales fluctuated as sales declined, as the following figures show:

sale	Expenses vs. Income
Period	percentage
Six months ending September 30, 2022	7.1%
2021	3.4%
2020	4.7%

click to enlarge

(Source – SEC)

The sales efficiency multiple, defined as how many dollars of incremental new revenue generated by each dollar of sales spend, fell to a negative 9.3 times over the most recent reporting period, as shown in the table below:

sale	efficiency rate
Period	Several
Six months ending September 30, 2022	-9.3
2021	6.2

click to enlarge

(Source – SEC)

Market and competition of MGO

According to a 2021 market research report by Grand View Research, the global market for “athleisure” products was estimated at US$307 billion in 2021 and is projected to reach US$661 billion by 2030.

This equates to a projected CAGR of 8.9% from 2022 to 2030.

The main drivers for this expected growth are a growing interest in sports and other outdoor activities by younger demographics for fun, health and fitness reasons.

Also, the chart below shows the historical and projected future growth path of the US sports sports market:

US sports market (Grand View Research)

Key contestants or other industry participants include:

• CR7

• MDC

• studies

• Adidas

• Mountain

• PANGIA

• under armor

• unknown

• EILEEN FISHER

• Patagonia

• carry pact

• Lululemon Athletica

• Other

MGO Global Financial Performance

The company’s recent financial results can be summarized as follows:

• Strongly fluctuating topline sales

• Negative gross profit and negative gross margin

• Reduced operating loss

• Increasing cash burn in operations

The following are relevant financial results arising from the company’s registration statement:

total revenue
Period	total revenue	% variance vs. before
Six months ending September 30, 2022	$336,103	-39.7%
2021	$880,340	26.7%
2020	$694,585
gross profit (loss)
Period	gross profit (loss)	% variance vs. before
Six months ending September 30, 2022	$258,545	-1.0%
2021	$487,933	56.5%
2020	$311,765
gross margin
Period	gross margin
Six months ending September 30, 2022	76.92%
2021	55.43%
2020	44.89%
Operating Profit (Loss)
Period	Operating Profit (Loss)	operating margin
Six months ending September 30, 2022	$ (196,946)	-58.6%
2021	$ (919,259)	-104.4%
2020	$(1,379,174)	-198.6%
net income (loss)
Period	net income (loss)	net margin
Six months ending September 30, 2022	$(2,081,192)	-619.2%
2021	$(985,895)	-293.3%
2020	$(1,423,786)	-423.6%
Cash flow from operations
Period	Cash flow from operations
Six months ending September 30, 2022	$(1,178,005)
2021	$ (769,822)
2020	$(401,579)
(Glossary of terms)

click to enlarge

(Source – SEC)

As of September 30, 2022, MGO had $20,586 in cash and $1.5 million in total debt.

Free cash flow for the twelve months ended September 30, 2022 was negative ($1.8 million).

MGO Global IPO details

MGO intends to raise $7.5 million in gross proceeds from an initial public offering of its common stock and is offering 1.5 million shares of the company at a proposed price of $5.00.

No existing shareholder has expressed an interest in buying shares at the IPO price.

A separate prospectus indicates that selling shareholders may offer up to 2.5 million additional shares.

Assuming a successful IPO, the Company’s enterprise value at IPO would be approximately $59.4 million, excluding the impact of underwriters’ over-allotment options.

The free float to outstanding share ratio (excluding over-allotments by underwriters) will be approximately 11.37%. A number below 10% is generally considered a “low float” stock, which can experience significant price volatility.

Management says it will use the net proceeds from the IPO as follows:

65% of net proceeds (approximately $3.8 million) for team expansion and marketing; and

35% of net proceeds (approximately $2.1 million) for corporate general and administrative purposes, including working capital and capital expenditures.

(Source – SEC)

Management’s presentation of the company’s roadshow is not available.

With respect to pending litigation, management states that it is not aware of any litigation that would have a material adverse effect on its financial condition or operations.

The listed bookrunners for the IPO are Boustead Securities and Sutter Securities.

Valuation metrics for MGO

Below is a table of relevant cap and valuation numbers for the company:

Metric	Crowd
Market capitalization at IPO	$65,946,150
Enterprise value	$59,424,564
price / sale	100.10
EV / Revenue	90.20
EV / EBITDA	-81.00
earnings per share	-$0.20
operating margin	-111.36%
net margin	-408.59%
Ratio of float to shares outstanding	11.37%
Proposed IPO midpoint price per share	$5.00
Net Free Cash Flow	-$1,772,416
Free cash flow yield per share	-2.69%
sales growth rate	-39.73%
(Glossary of terms)

click to enlarge

(Source – SEC)

Commentary on MGO’s IPO

MGO is seeking investments in the US public capital market for its marketing growth plans.

The company’s financial metrics have produced volatile and still low revenues, gross losses and negative gross margin, lower operating loss but higher operating cash burn.

Free cash flow for the twelve months ended September 30, 2022 was negative ($1.8 million).

Selling expenses as a percentage of total revenue varied as revenue fluctuated; its sales efficiency multiple was negative (9.3x) in the last reporting period.

The company currently plans not to pay dividends and to retain future profits to reinvest in the company’s growth initiatives.

The market opportunity for the provision of athleisure products is large and is expected to grow at a significant growth rate in the coming years, allowing the Company to capitalize on positive industry growth momentum in its favour.

Boustead Securities is the lead underwriter and IPOs led by the firm over the past 12 months have generated an average negative return (70.4%) since going public. This is a lowest performance for any major underwriter over the period.

The main risks to the company’s prospects as a public company are its small size and lack of an operating history showing significant revenue growth.

As for valuation, management is asking investors to pay an enterprise value/sales multiple of around 90.2x, an extremely high multiple given the company’s lack of revenue growth and history.

While the company shows promise due to the licensing of the Lionel Messi brand, management hasn’t shown it can in any way increase sales based on the company’s past results.

MGO Global IPO is highly speculative so I’m waiting for it.

Estimated IPO Price Date: To be announced.