Jose Martinez Calderon
What is Ultimax Digital?
Based in New York, NY, Ultimax Digital, Inc. (NFTX) was formed to develop payment technologies for video games and has since focused on NFT production and a marketplace.
Management is headed by the chairman and CEO Jesse Sutton, who has been with the company since 2021 and was previously CEO of Majesco Entertainment and President of Global Bit.
The company’s main offerings include:
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Ultimate marketplace
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toolbox
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game studio
As of June 30, 2022, Ultimax has $2.6 million in equity and debt investments 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 booked at fair market value.
According to a 2022 market research report by SkyQuest Technology, the global market for NFTs was estimated at US$15.7 billion in 2021 and is projected to reach US$122 billion by 2028.
This equates to a projected CAGR of 34.1% from 2022 to 2028.
The main drivers for this expected growth are an increasing demand for digital artworks, both visual and audio, a growing awareness of the technology among a broader group of consumers, and easier access to information and purchasing opportunities.
However, growth in the market has been particularly volatile, with strong growth in summer 2021 followed by a sharp drop in interest through summer 2022.
Key contestants or other industry participants include:
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coin base
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Open sea
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Larva Laboratories
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cloud flare
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Dapper Labs
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binance
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Other
IPO date and details from Ultimax Digital
The date of the initial public offering 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 exercise caution when considering investing in an IPO or immediately after an IPO. Also Investors should stick with it, however, remember that many IPOs are heavily marketed, past company performance is no guarantee of future results, and potential risks may be underestimated.)
Ultimax intends to raise $11.25 million in gross proceeds from an initial public offering of its common stock and is offering 2.5 million shares at a proposed mid-price of $4.50 per share.
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 $76.8 million, excluding the impact of insurer over-allotment options.
The ratio of free float to shares outstanding (excluding over-allotments by underwriters) will be approximately 13.5%. 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 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, redemption of the convertible debentures that will not be converted into common stock by the holders, and capital expenditures.
(Source – SEC)
Management’s presentation of the company’s roadshow is not available.
Regarding pending litigation, management said the company “is not a party to any pending litigation, nor is our property the subject of any pending litigation.”
WestPark Capital is the only listed bookrunner for the IPO.
How to invest in the company’s stock: 7 steps
Investors can purchase shares of the stock in the same manner as shares of other publicly traded companies or as part of the pre-IPO allotment.
Note: This report is not a recommendation to buy stocks or other securities. For investors interested in making a potential investment after the IPO closes, the following steps to buying shares will be helpful.
Step 1: Understand the financial history of the company
Although not much public financial information is available about the company, investors can view the company’s financial history on its Form S-1 or F-1 with the SEC (source).
Step 2: Evaluate the company’s financial reports
The primary financial statements available for publicly traded companies include the income statement, balance sheet, and cash flow statement. These financial statements can help investors understand a company’s cash capitalization structure, cash flow trends, and financial condition.
My summary of the company’s recent financial results is below:
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The company’s financials show no revenue and significant operating expenses over the past several years.
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Free cash flow for the six months ended June 30, 2022 was negative ($861,643).
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The company currently plans not to pay any dividends on its common stock and intends to reinvest future profits into the growth and operational needs of the company.
Step 3: Evaluate the company’s potential against your investment horizon
When investors evaluate potential stocks to buy, it’s important to consider their time horizon and risk tolerance before buying stocks. For example, a swing trader might be interested in short-term growth potential, while a long-term investor might prioritize strong financials over short-term price moves.
Step 4: Choose a brokerage
Investors who do not already have a trading account start by choosing a brokerage firm. Account types commonly used for trading stocks include a standard brokerage account or a retirement account like an IRA.
Investors who prefer fee-based advice can open a trading account with a full-service broker or independent investment advisor, and those looking to manage their portfolio at a reduced cost can opt for a discount brokerage firm.
Step 5: Choose an investment size and strategy
Investors who have decided to buy shares in the company should consider how many shares they are buying and what investment strategy they are adopting for their new position. The investment strategy determines an investor’s holding period and exit strategy.
Many investors choose to buy stocks and hold them for an extended period of time. Examples of basic investment strategies are swing trading, short-term trading, or investing over a long-term holding period.
Investors wishing to receive an allocation of shares at the IPO price prior to the IPO would “express interest” to their broker prior to the IPO. Declaring an interest is not a guarantee that the investor will receive an allotment of shares prior to the IPO.
Step 6: Choose an order type
Investors have many ways of placing orders to buy stocks, including market orders, limit orders, and stop orders.
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Market Order: This is the most common type of order filled 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 set 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 specific price, known as the stop price, which will be higher than the current market price. In the case of buy stop, the stop price is lower than the current market price.
Step 7: Submit the trade
After investors fund their account with cash, they can set an investment size and order type, and then submit the trade to place an order. If the trade is a market order, it will be executed immediately at the best available market price.
However, when investors place a limit order or stop order, the investor may have to wait for the stock to reach its target price or stop-loss price for the trade to complete.
The final result
NFTX is seeking investments in the US public capital market to fund its proposed growth plans and potentially redeem convertible debentures.
The market opportunities for the provision of various NFT-related services are large and expected to grow significantly in the future as consumers search for 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 past 12 months have generated an average negative return (49.0%) since its listing. This is a lowest performance for any major underwriter over the period.
The main risks to the company’s prospects come from its lack of any revenue history and stiff competition from large players that have already gained significant market share in the network effects industry.
As for the valuation, management is asking investors to pay an enterprise value of around $77 million for a company with no revenue history.
Therefore, the NFTX IPO is highly speculative as management has not generated any revenue.
While the IPO may attract day traders looking for volatility, I’m waiting for it.
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