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A quick look at NYIAX
NYIAX, Inc. (NYX) has filed to raise $20 million in an initial public offering of its common stock, according to an S-1 registration statement.
The company operates an online advertising marketplace for buyer and seller.
As an investable company at this stage of development, I don’t favor going public because it’s expensive for a company with a tiny revenue base that’s losing money.
I’m on hold for the NYIAX IPO.
NYIAX overview
Based in New York, NY, NYIAX was formed to develop an online system to match buyers and sellers of advertising space on the Internet.
Management is led by President and interim CEO Christopher Hogan, who has been with the company since its inception and was previously a director of consulting firm Southside Strategy LLC.
The company’s main offerings include:
-
Marketplace for advertising
-
Contract Performance and Agreement
Below is a business diagram showing the system concept:
SEC. EDGAR
NYIAX has booked investments at market value of $39.2 million as of March 31, 2022 from investors including Suwyn Investments, LLC and others.
NYIAX – Customer Acquisition
The company seeks buyer (advertiser) and seller (publisher) customers who wish to use their marketplace for their contract advertising needs.
NYX says it uses a blockchain to record transactions as a “core ledger,” which appears to offer transparency while allowing privacy for certain types of data.
Selling, general and administrative expenses as a percentage of total revenue have fallen as revenue has increased, as shown in the following figures:
|
Sale, G&A |
Expenses vs. Income |
|
Period |
percentage |
|
Three months. Ends March 31, 2022 |
480.0% |
|
2021 |
1194.9% |
|
2020 |
7745.1% |
(Source)
Sales, G&A efficiency multiple, defined as the amount of incremental new revenue dollars generated by each sales, G&A dollar spent, increased 0.2 times over the most recent reporting period, as shown in the table below :
|
Sale, G&A |
efficiency rate |
|
Period |
Several |
|
Three months. Ends March 31, 2022 |
0.2 |
|
2021 |
0.1 |
(Source)
NYIAX market
According to a 2021 market research report by eMarketer, the global digital advertising market is expected to reach $646 billion by the end of 2024.
The following chart shows the report’s forecast growth path and Digital Advertising Spend percentage of the total from 2019 to 2024:
Digital advertising spend worldwide (eMarketer)
Management says the company competes with traditional vendors for buying and selling advertising, but says the company complements “current industry technologies” and collaborates with rivals in some ways.
NYIAX financial performance
The company’s recent financial results can be summarized as follows:
-
Increasing topline earnings
-
Increasing operating losses but reduced negative operating margin
-
Higher 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 |
|
Three months. Ends March 31, 2022 |
$485,065 |
–% |
|
2021 |
$593,899 |
1021.7% |
|
2020 |
$52,945 |
|
|
Operating Profit (Loss) |
||
|
Period |
Operating Profit (Loss) |
operating margin |
|
Three months. Ends March 31, 2022 |
$ (3,093,809) |
-637.8% |
|
2021 |
$(10,442,270) |
-1758.3% |
|
2020 |
$(5,813,124) |
-10979.6% |
|
net income (loss) |
||
|
Period |
net income (loss) |
net margin |
|
Three months. Ends March 31, 2022 |
$(3,650,204) |
-752.5% |
|
2021 |
$(12,251,965) |
-2525.8% |
|
2020 |
$(6,174,111) |
-1272.8% |
|
Cash flow from operations |
||
|
Period |
Cash flow from operations |
|
|
Three months. Ends March 31, 2022 |
$(2,570,926) |
|
|
2021 |
$(7,026,980) |
|
|
2020 |
$(4,748,255) |
|
|
(Glossary of terms) |
(Source)
As of March 31, 2022, NYIAX had $2 million in cash and $11.2 million in total debt.
Free cash flow for the twelve months ended March 31, 2022 was negative ($8.4 million).
NYIAX IPO details
NYIAX intends to raise $20 million in gross proceeds from an initial public offering of its common stock and is offering 4.44 million shares at a proposed mid-market price of $4.50.
No existing shareholder has expressed an interest in buying shares at the IPO price.
Assuming a successful IPO, the Company’s enterprise value at IPO would be approximately $55.2 million, excluding the impact of underwriters’ over-allotment options.
The ratio of free float to shares outstanding (excluding over-allotments by underwriters) will be approximately 27%. 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:
We intend to use primarily the net proceeds from this offering [i] for general corporate purposes, including working capital, capital expenditures and operating expenses; [ii] for the development of new applications and functions for and improvements to our technology platform; [iii] to acquire complementary businesses or technologies; and [iv] to hire additional resources to support our product development and international expansion efforts.
(Source)
Management’s presentation of the company’s roadshow is not available.
With respect to pending lawsuits, management has not specified whether the Company was a party to a material legal claim.
The company says its relationship with Nasdaq in developing the underlying technology is critical to its future success.
The sole public bookrunner for the IPO is Boustead Securities.
Valuation metrics for NYIAX
Below is a table of relevant cap and valuation numbers for the company:
|
Measure [TTM] |
Crowd |
|
Market capitalization at IPO |
$74,233,737 |
|
Enterprise value |
$55,243,560 |
|
price / sale |
68.80 |
|
EV / Revenue |
51.20 |
|
EV / EBITDA |
-4.54 |
|
earnings per share |
-$0.82 |
|
operating margin |
-1127.83% |
|
net margin |
-1312.18% |
|
Ratio of float to shares outstanding |
26.94% |
|
Proposed IPO midpoint price per share |
$4.50 |
|
Net Free Cash Flow |
-$8,378,711 |
|
Free cash flow yield per share |
-11.29% |
|
Debt / EBITDA multiple |
-0.08 |
|
sales growth rate |
–% |
|
(Glossary of terms) |
(Source)
NYIAX IPO Commentary
NYX seeks public capital markets investment for general, unspecified corporate purposes.
The company’s financials have resulted in increasing revenues, growing operating losses, but a reduced negative operating margin and significantly higher operating cash burn.
Free cash flow for the twelve months ended March 31, 2022 was negative ($8.4 million).
Selling, G&A expenses as a percentage of total revenue have decreased as revenue has increased from a tiny base; its sales, G&A efficiency multiple increased to 0.2 times in the last reporting period.
The company currently plans not to pay dividends on its shares and expects to use future earnings to reinvest in its growth initiatives.
The market opportunity for digital ad spend growth is significant at least through 2024, with eMarketer forecasting double-digit growth rates.
Boustead Securities is the sole underwriter and the IPOs the firm has led over the past 12 months have generated an average return of 4.1% since going public. This is a peak performance for all major underwriters over the period.
As for valuation, management is asking public investors to pay an EV/sales multiple of over 51x.
Despite extremely low earnings, the company hailed the IPO as perfection and at a time when public companies with significant operating losses due to rising costs of capital are being penalized by the stock market.
Like many small companies looking to go public, NYX is offering its shares at a low price, an average of $4.50 per share.
Companies that go public at this price often face high volatility from investors in the first few hours or a few days of trading.
As an investable company at this stage of development, I don’t favor going public because it’s expensive for a company with a tiny revenue base that’s losing money.
I’m on hold for the NYIAX IPO.
Estimated IPO Price Date: To be announced.
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