SMC Entertainment (OTCMKTS: SMCE) stock has been on an impressive run ever since the company reported the acquisition of FiberSKY Networks, Inc. A 300% plus rally at a time when the stock market is bearish indicates strengthening investors’ confidence in SMCE’s new business model.
SMC Entertainment Price Analysis And Recent Announcements
Many positive developments appear to be taking place on this name. In September and October 2019, SMC Entertainment signed an impressive run, near all-time lows, after a long period of consolidation. That’s not all. As shown in the chart below, since July 2019, market volume spiked up to more than 5 million and 10 million shares changed:
Source: Bigcharts
Let’s understand the most recent developments a bit. As of July 15, 2019, SMCE reported a Letter of Intent to acquire 100% of Milwaukee, Wisconsin-based FiberSKY Networks, Inc. in an all-stock deal. Even though SMCE was expected to issue new shares to pay for FiberSKY Networks, the market appreciated the press release. On the announcement day, both the share price and the volume increased to a six-month high. Potential organic synergies and future growth explain the impressive market movement:
“We are very excited at the prospect of joining the SMC team. There are organic synergies between our two companies, and with SMC’s help, we will accelerate our growth and market reach.” Source: President and CEO of FiberSKY
In September 2019, the market confirmed the continuation of the uptrend when SMCE announced the close of the transaction. Almost 5 million shares changed hands after the market noticed that FiberSKY’s 2018 revenue was said to be approximately $0.118 million (unaudited). Without any doubt, FiberSKY may be a game changer for SMCE. That’s what seems to be making the company’s share price move up:
“FiberSKY is expanding its current business plan and customer base, which would potentially have a significant increase in future revenues. As we integrate our two companies, with our planned growth through future acquisitions, the repositioning of our combined business plan strategy will have a positive direct impact on future revenue of SMC.” Source: President and CEO of SMC
SMC’s Business Model And The New Acquisition
SMC Entertainment Inc. currently provides digital content, wireless communications services, and media distribution solutions. However, with the acquisition of FiberSKY, the number of services offered are expected to increase. FiberSKY brings a new design concept, which involves a hybrid Internet of Things (IoT)-based broadband network system called FiberSKY™. The company’s network includes new technology, such as fiber optics, power lines as well as licensed and unlicensed wireless frequencies. They are said to offer efficient and scalable network connections.
Bottom Line
Currently trading with a market capitalization of $2.2 million, SMC Entertainment Inc. reported 2018 revenue of less than $0.1 million and negative net tangible assets. It means that the market appears to expect massive business growth and synergies once FiberSKY’s post-merger integration is executed.
Yes, in 2018, SMCE’s balance sheet and income statement did not seem to interest the market. However, with the new business transformation, there is a renewed market interest as the management is making all the right moves. FiberSKY’s 2018 revenue seemed to be better than that of SMC Entertainment. Thus, the combination of both companies would most likely generate more revenue than that of SMCE alone.
Let’s follow the next few quarters carefully. After taking into account FiberSKY’s financial figures, SMCE could surprise the market once again.
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Disclosure: We hold no position in SMC Entertainment either long or short, and we have not been compensated for this article.
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