RC365 Holding (LON: RCGH) shares are up 10% on the announcement of another deal. RCGH shares do tend to rise on the announcement of a deal and we’re never really sure of the value of any of them. To the extent that we’re deeply unconvinced of the value of RCGH shares themselves. So much so that we tend to think that they’re the beneficiaries of a bit too much of that meme stock trading, like the AMTD twins and Top Financial. Something vaguely Far East, Hong Kongish and in financials - gotta be worth something, right?
The deal today is that RC365 has taken out a licence on some terribly hot AI driven software. Going to make a fortune from it, no doubt: “RC365 Holding Plc ("RC365"), a company focusing on payment gateway solutions and IT support, is pleased to announce that it has signed a non-binding Letter of Intent ("LOI") with YouneeqAI Technical Services Inc ("YouneeqAI"), a US company with an AI-driven cookieless personalisation platform that empowers online businesses to deliver personalised digital experiences and increase engagement and revenue. The LOI sets out the terms, subject to technical and legal due diligence, on which the Company will acquire the exclusive rights to YoouneeqAI's IP and Platform in the UK, with a right of first refusal to purchase additional territories.”
Hmm. We’d note that until March YouneeqAI was in fact American Hemp. Which is quite a change but it’s also the leaving of one formerly hot sector, hemp, for the new new hot sector, AI. We’d also note that YouneeqAI is valued, in toto, at some $13 million. Which makes the £6 million (3 million shares now, 3 million in a year) plus a 1% royalty that RC365 is paying for access to the software look really very high indeed. And this buys only the UK usage rights.
But then as we’ve been saying for some time now we don’t really buy any of the RC 365 deals: “ Now let's recast this RC365 Holding idea. RCGH is being paid some £1.5 million to write a wealth management app for an £8 million a year turnover company. It's also just an upgrade to the extant product. This collaboration, this contract, has added £80 million to the market capitalisation of RC365 Holdings in London? No, we do not believe that this is a rational reaction, nor do we believe it's a justified one on the substance of the deal.
We call this the arrival in London of that silliness over HK financials that has so infested NASDAQ this past year. Nonsense in short. The problem with actually going short is of course that none of us has any idea how long the nonsense will last.
Also about RCGH: “Now think on this for a moment. At that 60 pence - before this latest announcement - RCHG had a market capitalisation of some £60 million, give or take. After the announcement it's at £120 million (actually, £118 million). So, the additional value from this announcement is £60 million. That's applying a valuation of £20,000 to each credit card issued. That's absurd.”
We simply do not see the value here. We insist it’s all meme stock excitement and nothing more.
