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A "Lilbit" too ambitious?

Black Dog

Lilbit AS brought in the maximum amount possible of MNOK 28 in their private placement with Folkeinvest.

Date: 12.10.2021

Authors: Nikolas Traavik Nesheim, Fredrik Hekkelstrand

Overview

Lilbit AS has succeeded in convincing investors at Folkeinvest, with over 900 new stockholders. To achieve its rapid projected growth, Lilbit AS is relying on establishing itself outside the Nordic region. It is, however, highly uncertain what the demand for the products will be in the next few years, especially in the rest of Europe, where there are already established companies offering GPS tracking solutions.

 

The health monitoring feature Lilbit offers is not exclusive, given that similar products are available for dog owners (Fitbark). The health monitoring of Lilbit's product is expected to be available in 2022.

 

Valuation

The private placement was promoted with a "discount".  There are two separate, external valutations that value the company in the range of MNOK 420-400. The company's reason for "discounting" the MCAP to MNOK 130 is to secure liquidity to stay on schedule.

 

Two things need to be adressed; firstly the independent valutations are based on the company's own projections (which gave a MCAP of MNOK 570), they are simply scenario-reports, and will not reflect the real risk of an investment in Lilbit AS, if Lilbit AS' own figures are inaccurate.  Secondly, why would the MCAP be reduced by 66% if MNOK 400 was fair value for the company?

                            Lilbit AS

- Lilbit AS, a Norway-based tech company that primarily sells GPS-trackers for dogs, are aiming to expand market share in Europe soon.

- Lilbit AS recently brought in MNOK 28 through a private placement on Folkeinvest, a crowdfunding website.

- MCAP before private placement at aprox. MNOK 130, with revenues in 2021 amounting to MNOK 14.

- The company seeks to sell their products to 1% av European dog owners, by 2023. This will in increase EBIT by 30.000% in roughly 2 years, according to the company's own projections.

Outlook

Lilbit AS has been dubbed the "Dog-Xplora" by Norwegian financial outlets, due to similiarities with GPS-tracking.  Expansion often leads to a negative cash flow during the growth phase, which may force Lilbit-shareholders  to revise  and lower expectations on growth and turnover. Xplora, which in recent years have managed to grow sales strongly, is still losing money. Xplora's EBIT loss has increased in conjunction with stronger revenues , and they are still struggling to gain and establish market share in certain markets internationally. When comparing the two, a 30.000% growth in EBIT in two years for Lilbit, seems impossible. They are welcome to prove us wrong.

 

Going forward, the question for Lilbit-shareholders will be whether the European dog-owners are as enthusiastic about the product as them. Customer reviews of previous iterations of Lilbit products were that they were "complete s***" - suggesting there may be a disparity currently.

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