Professional Documents
Culture Documents
SHORT Paid Promotions Set Stage for Massive Dilution after Large Number of Shares Issued
to Insiders; Though a likely fraud, AWSM is, regardless, a zero.
Cool Holdings
(NASQ: AWSM) | Target: $0 Cool Holdings Inc is a retailer of mainly Apple products under the
Price $12.09 % Short 2% OneClick brand; AWSM has (4) stores in Florida, (6) stores in Argentina,
Shares 7.38 % Float 80% and (7) stores in the Dominican Republic. The Cooltech Distribution
Mkt Cap $89.18 Borrow Rate 149.7% brand distributs electronics to electronic resellers and retailers in
EV $91.88 1week Avg Volume 4.1m LATAM and the US.
To begin, the business model is non-viable. Generally, and in reselling these branded electronics, there are two effective
business models – scale (TGT, WMT, BBY) and niche (AAPL, VZ, TMUS, T). As margins in the scale model are razer thin,
reselling branded products is a game of operational efficiency. Successful brick-and-mortar scale models have made
necessary advances in such efficiencies amid impacts felt by e-commerce, as well as forays into e-commerce. As, in many
cases, you effectively compete against your suppliers, you must be able to weaponize scale so that your operating costs
are dwarfed by your revenue and COGS. Business models absent these requirements, operating in competition with the
aforementioned, are doomed to negative profits and eventual failure. To be clear, AWSM does not engage in e-commerce.
However, the company has recently announced a plan to open 200 more stores by 2021. A cursory look at their financials
suggests this is impossible – the business barely offsets negative cash flows with dilution and the company had $429 in
cash in their most recent filing. In fact, before a round of massive dilution, $10m in current debt had rendered the
company virtually insolvent.
The company registered for a $25m shelf offering in June, with amendments in August and September. In mid-
September 2018, several articles with hilariously absurd claims broke on major platforms such as Zacks and Yahoo Finance.
“This just might be the biggest opportunity in real estate since Peter Minuit bought the
island of Manhattan for $24 worth of beads” This one is my favorite.
“This Could Be A $900 Million Real Estate Play In Phase 1 Alone”
At the bottom of these articles you may find a disclaimer “Cool Holdings will pay the Publisher four hundred fifteen
thousand US dollars over four months to produce and disseminate this article and certain banner ads … This compensation
should be viewed as a major conflict with our ability to be unbiased”i AWSM spent $415 on the paid advertising (recall
the $429 in cash?).
Anyway,
Let’s take a look at AWSM’s flagship store at 48 NW 25th St, Miami FL.
As others have pointed out, AWSM’s flagship store is in a very poor and crime-ridden Miami neighborhood. I encourage
others to explore the surrounding area here.
Fortunately for AWSM, several 5-star Yelp reviews by newly-minted accounts all happened to make posts on the same
day, bolstering public opinion on the quality of their brand (haha). Yelp blocked (most) of the attempt. The Yelp reviews
of another FL location are hilarious and are worth reading; here.
There is little question that horribly operated stores in crime ridden Miami neighborhoods or deeply economically
troubled Latin American countries will certainly not rival the Apple’s revenue per sq ft.
In the days preceding the company exchanging their last cash for paid advertisements, the company issued massive
amounts of shares and warrants to management.
Muckraker
Insider Transactions
Reinier Voigt (CFO) 8/15/2018 8/17/2018 9/13/2018
Shares granted 14,610 31,869
Warrants 31,869
Shares 11,960 26,570 90,308
Alfredo Carrasco (COO)
Shares granted 62,194
Warrants 62,194
Shares 124,388
Mauricio Diaz (CEO)
Shares purchased 41,672
Warrants 424,348
Shares 125,014 549,362 591,034 591,034
Felipe Rezk (CMO)
Warrants 361,018
361,018 361,018 361,018
Notably, the warrants vest just six month after issuance – in Q119.
Why do the company’s statements do not provide addresses of the numerous locations?
The reverse—merger agreement describes four consumer electronics stores in Argentina; incorporated in 2008, OneClick
Argenino’s principle address is listed as 1177, 9 de Julio Street, city of Rosario, Province of Santa Fe, Republic of Argentina.
Thanks to Google Street View … we can see a 2013 edition of OneClick Argentina’s main store.
Slightly zoomed in …
Muckraker
By 2016, however, the store appears to have another operator and is also up for sale.
Muckraker
Additionally,
According to Cooltech, they’ve held the lease on this Argentinian address since February 2017.
Catalysts:
$25m shelf offering hits, inept retail investors don’t last forever, SEC investigation (others have reported), and
delisting
Risks:
Catalysts could take time to materialize. Cost of borrow is an abysmal 149% on Interactive Brokers.
Appendix
Multiple private placements with Laidlaw & Company – which was recently sanctioned by FINRAii. Read an interesting,
though somewhat tangential, expose on Laidlaw and Barry Honig here.
What’s a pump-and-dump without some related party fun? Smash Technologies, Inc received nearly $200k from the
impoverished company during 3Q18. Smash Technologies, Inc is “a reseller of accessories”. However, Smash Technologies,
Inc evidently only exists in conjunction with its incorporation documents and Cool Holdings and Infosonic’s SEC filingsiii.
Smash Technologies, Inc is owned and operated by a family member of AWSM management.
Investment and $66,666 evidently borrowed from Barry Honig, who was recently profiled in the WSJ following
announcement of SEC investigation regarding multiple microcap pump-and-dump scamsiv.
CMO Felipe Rezk’s experience as Head of Enterprise Sales, ALAC has been parlayed into “Apple Experience is Embedded
in Their Executive DNA”. As anyone who has done enterprise sales to LATAM knows, selling to LATAM businesses is not
an easy gig. The lack of data and financial resources often relegates the region to the bottom of the strategic priority list.
Of course, for two years Felipe was tasked with selling Apple products to businesses, not consumers, and in one of the
most difficult-to-access markets in the world.
Short Interest
6/29/2018 7/13/2018 7/31/2018 8/15/2018 8/31/2018 9/14/2018
Short Interest 101,547 126,319 130,244 126,804 129,221 134,441
% Short 1.7% 2.1% 2.2% 2.1% 2.2% 2.3%
Average Daily Share Volume 119,310 85,386 52,448 35,378 60,732 154,636
Days to Cover 0.85 1.48 2.48 3.58 2.13 0.87
Source: NASDAQ
Muckraker
Muckraker
i
https://finance.yahoo.com/news/next-big-thing-retail-233000988.html
ii
https://www.stopbrokerfraud.com/news/laidlaw-company/
iii
https://www.google.com/search?q=%22Smash+Technologies%2C+LLC%22&oq=%22sm&aqs=chrome.0.69i59j69i57j35i39j0l3.791j0
j7&sourceid=chrome&ie=UTF-8
iv
424B3 Prospectus Supplement, filed 02/12/2018
The claims presented here are my own opinion and do not represent investment advice.