ThreeD Capital Inc. ( IDKFF in U.S. IDK.CN in Canada)
Industry (Venture Capital Investment into Disruptive Technology and Junior Resource)
C.E.O. & Chairman: Sheldon Inwentash
Highlights
- Proven track record of C.E.O Sheldon Inwentash
- Visible, and in some cases, exponential, growth by current holdings
- A focus on disruptive technology and mineral resources
- Game-changing I.P.O.s arriving in 2021.
Why We Love It:
Before we begin, I should make an admission. This was an exciting, but intimidating story to dig into. Writing for Stock Fam has led me down the rabbit hole to several compelling stories of companies undergoing incredible growth, and each one continues to attract investors at higher levels. Those stories weren’t always simple to research, but they were easy to tell. Each with smart management, an industry ripe for disruption, and a product or service with the potential to make that disruption a reality.
But ThreeD Capital isn’t just a story; it’s an anthology. Sheldon Inwentash isn’t just a C.E.O.; he’s a legend. And ThreeD isn’t just a Stock Fam favourite; it’s The Holy Grail.
If you’ve been invested in the company since October, like many Stock Fam investors have, you’ve done very well for yourself, and you wouldn’t be a smart investor if you didn’t wonder “Are we getting ahead of ourselves here?” To answer that -and there is, unequivocally, an answer- we need to look at the past, the present, and the future. They are all essential to our due diligence on ThreeD.
The past begins and ends with Sheldon Inwentash. Most Canadian investors will undoubtedly know the name, but since many of our readers are American, let’s touch on some of the highlights. Inwentash is mostly renowned for his tenure with Pinetree Capital. Under his leadership, Pinetree made very large and early investments into “unicorn” resource companies such as Aurelian Resources (sold for $1.2 billion to Kinross) and Gold Eagle Mines ($1.5 billion to Goldcorp) and, through a myriad of profitable investments, the company rose to the lofty heights of a $1-billion market cap. But Pinetree, which Inwentash founded in 1992, didn’t begin in the resource space; it pivoted to it.
In the very early years, the firm focused on the technology and biotech sectors. But, as ThreeD investors of today can attest, Inwentash’s great talent is recognizing opportunity, quickly gaining an understanding for it, and moving decisively to capture momentum. He believed that value was going unrecognized among resource companies (especially in gold mining) that had proven assets but very little market attention. Pinetree did extensive early due diligence, but when the time was ripe, they moved quickly and aggressively. Investor value grew at a breakneck pace as Pinetree took profits from its biggest success stories like Aurelian, and moved them into emerging players in the industry. Inwentash and other venture capitalists like Eric Sprott were widely recognized as wealth creators, and they galvanized investment in the industry.
But the past is the past, and whether you are a student of history or not, your money grows in the here and the now. So how does ThreeD differ from Pinetree, and why has it been so successful already?
Pinetree’s strategy capitalized on a strong bull market for commodities, and when gold prices retracted severely, the entire industry felt it. This time around, there remains a focus on emerging junior exploration companies, roughly 30-40% of total investment. However, the major difference, and arguably the biggest driver of success, has been the other 60-70% in disruptive technology, which is defined as innovation that sweeps away the practices and habits it replaces because it is so clearly superior.
At this point, it should be made clear that ThreeD is an aggressively managed Venture Capital Firm. It is NOT a nice, sleepy ETF with a basket of stocks that never seem to change, no matter the market conditions. Remember, Inwentash sees opportunity and acts accordingly, so one cannot assume that ThreeD still owns every single share that it originally purchased in any given company. Some profits have already been moved into new opportunities, and in other cases, ThreeD has continued buying shares on the open market. The closest comparison to ThreeD in the large-cap space would be The ARK Innovation ETF, run by Cathy Wood, the current toast of Wall Street. Both companies focus on disruptive technology, but while ARK invests in more established players, ThreeD takes an even more hands-on approach with many of them, with Inwentash often being asked to join the Board as Chairman or in other advisory roles.
I originally planned to focus more heavily on some of the 2020 runaway success stories, like Peak Fintech, Loop Insights, and Bluesky Digital Assets, but those of you in the Stock Fam community know all about them. You know that revenue estimates for 2021 are expected to be far in excess of $120 million for Peak as it moves to NASDAQ this quarter. You’re already aware of Loop’s emergence as a global player, using A.I. and IoT (Fancy anagrams for Artificial Intelligence and The Internet of Things) to connect brick and mortar stores through data. You’ve seen the gains in stock price as Bluesky scales its cryptocurrency mining operation. You have probably even noticed that St. George’s Eco-Mining has brought on Paul Pelosi Jr. (son of House Speaker Nancy Pelosi) to run its lithium extraction and recycling businesses. And if you were especially observant over the last few days, you’ve noticed that Sheldon Inwentash joined the Board of Windfall Geotek, with ThreeD now possessing over 10% of the total share count (Sounds like a fun company to do some research on).
The truth is that the overwhelming majority of the 50+ ThreeD-invested companies have risen considerably from the original entry price. This isn’t a secret; in fact, it is all easily accessible with some simple due diligence or by going to the Stock Fam dedicated channel for ready-made DD. Just to get you started, I’ve linked some of my recent DD articles (from Reddit) on companies who’ve received major ThreeD investments. I hope you enjoy them, but here we need to shift our focus to the future, and address the most important question current shareholders must be thinking:
“The stock was about CDN $2.00. Have I missed the boat?”
To answer this question, we begin by looking at the current market cap of IDK, which hovers just above $80m (all figures are in Canadian dollars unless stated otherwise). At its peak, Pinetree Capital was sitting at a $1-billion market cap . So, now it’s my turn to ask a question:
“Do you really think a legend like Inwentash, with decades of accumulated knowledge and experience, and a reputation as one of the most successful venture capitalists Canadian history, is going to be satisfied at $80 million? $160 million? 500 million?”
But facts speak louder than anything, including reputation, so we enter the final segment of this anthology with a look into the very near future: Enter the N.A.V.
Just like all other companies, investment firms are expected to release financial results quarterly. Publicly-traded investment companies release their “Net Asset Value” (referred to commonly as a NAV), which is calculated like so:
Value of Assets (based on current stock prices) - Liabilities = Net Asset Value.
ThreeD made a key announcement late last year, vowing to release their NAV on a monthly basis. To do this, the company had to get special permission from the exchange. It should be noted that the monthly NAV reports are non-GAAP (more of a snapshot, as investments are changing rapidly). The first NAV of 2021 is expected by the middle of February.
So, short-term and even medium-term investors will be forgiven for chanting “NAV, NAV” in their sleep; it is an important marker to monitor progress, after all. But as others focus probably too much of their attention on the first of these monthly snapshots, you may be wondering: “Why? Why publish a NAV every month?” It’s a nuisance to do. It’s unnecessarily transparent.
Don’t overthink the answer. Anyone who is going out of their way to be transparent has important, positive developments to attach value to, and a desire to share them with investors. In the case of ThreeD, you need look no further than the upcoming IPOs.
An I.P.O. (Initial Public Offering) is an event that brings a private company to investors in the public domain. I.P.O’s are often hotly anticipated, especially in times like these, when there is positive sentiment in the markets. Some 2020 large-cap IPOs were Snowflake, DoorDash, and AirBnB. A significant I.P.O. for ThreeD investors to look forward to in 2021 is Premium Nickel Resources, or PNR. PNR made major headlines very recently by beating out a host of rival bids to become the “preferred bidder” of a massive Nickel Mine in Botswana, as selected by the Botswanan Government. Nickel prices have risen sharply this year due to its vital presence in electric vehicle batteries, for which demand is expected to skyrocket this decade. PNR will have six months to inspect mine conditions to ensure purchase, but if all goes as expected, it will be a major coup for the company, which will purchase the mine at a favourable liquidation price. This agreement was recently announced on Canada’s major business network, BNN, which should give you an idea of the significance.
Two of P.N.R’s larger shareholders are North American Nickel (WSCRF, NAN.V) and the ever-present ThreeD Capital. And by the way, ThreeD is invested into NAN as well. Do you know who else is invested in NAN, with a significant 20% ownership? CATL (Contemporary Amperex Technology Co.).
CATL, for those who aren’t acquainted with this nearly 1-trillion dollar market-cap behemoth, is a global leader in lithium-ion battery manufacturing. Their clients include BMW, Toyota and Tesla, amongst a host of others. Something tells me that securing purchase orders for PNR’s nickel won’t be a problem. Oh, and Sheldon Inwentash is a director of PNR.
And then there are those TODA notes (Those what?). TODAQ is a decentralized ecosystem that is bringing blockchain to governments, corporations, and individuals through digital currency. This story deserves its own article, but for now, it is enough to know that it is partnering with organizations like Hyundai, VISA, and the US Military, as well as a long term partnership with the Government of Saudi Arabia. A company called Gratomic (CBULF, GRAT.V) is backstopping this currency with massive amounts of graphite from their ongoing mining projects. ThreeD has invested heavily in Gratomic, and as a result, they currently hold in the neighbourhood of 200 million TODA notes (TODA notes are essentially cryptocurrency tokens, like Bitcoin or Ether). The most recent TODA contract valued the notes at 1.00 USD each, which would value ThreeD’s TODA notes at just under $200 million USD, or nearly $250 million CDN.
Now, let’s revisit the current ThreeD market cap. I won’t make you scroll up and find it; it’s about $80 million CDN. Let that sink in. The value of ThreeD TODA notes is triple the current market cap of the entire company!
Keeping in the cryptocurrency space, ThreeD has made a large investment into SenseChat, a crypto-enabled chat ecosystem that gives users tokens just for participating. It is potentially disruptive to the messaging landscape in that it is far more secure with users data and it actually rewards users with tokens of real value within the ecosystem- and eventually outside of it as well. Attention is growing rapidly as the ecosystem is just emerging from beta testing. The founder and C.E.O. is Crystal Rose, wife of cryptocurrency titan, Brock Pierce. ThreeD owns roughly 30 million SENSE Tokens.
Finally, two major resource projects will soon emerge in the ThreeD anthology. One-Bullion is another hotly anticipated I.P.O. in 2021, with major precious metals projects in Botswana. The second is the Corcoran Canyon Silver Project in Nevada and Emily Manganese Project in Minnesota, which through a series of transactions, will be under the banner of a new company: Nevada Silver Corporation. ThreeD is an investor and Inwentash will operate as Chairman of the Board.
Each one of these projects has the potential, and in fact the likelihood, to not only increase ThreeD net assets, but multiply them.
Finally, let’s very briefly go over the share structure. The number of shares outstanding is just over 40 million. That is absurdly tight, which means that as ThreeD investments grow, the stock price can move explosively. There appears to be no further need to raise capital, so don’t expect dilution to happen any time soon, if at all. And while it makes sense that the share price should shadow the NAV, Inwentash’s Pinetree Capital commonly traded at 2.5x the NAV in its heyday.
Any investor, experienced or otherwise, can be forgiven for missing aspects of a single company’s story, causing them to take a short-sighted view. And let’s be honest, it’s easy to get lost trying to connect the dots within the labyrinth of ThreeD investments. But we are armed with our own collective due diligence, and that DD tells us to trust in the past (Inwentash’s experience and knowledge), appreciate the present growth, and look to the future.
The Holy Grail is in our hands.
Join the discussion on the Stock Fam discord channel, watch C.E.O. interviews and analysis with Stock Fam hosts Hammy and Sean. See you on the boards!
-Mr. Dotto (@MrDotto5)
Links to other compelling Stock Fam stories related to ThreeD Capital:
https://www.reddit.com/r/StockFamGroup/comments/l8xqlt/why_we_like_peak_fintech_peak_fintech_pkk_pkkff/ (Peak Fintech)
https://www.reddit.com/r/StockFamGroup/comments/l9vl33/why_we_like_st_georges_ecomining_sx_sxoof_written/ (St. George’s Eco-Mining)
https://www.reddit.com/r/StockFamGroup/comments/l94iby/why_we_love_auxico_resources_auag_auxif_manganes/ (Auxico Resources)
https://www.reddit.com/r/StockFamGroup/comments/lcyvad/bluesky_digital_assets_corp_and_why_we_love_it/ (Bluesky Digital Assets)
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