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Written by
Jarrod Wesson
Published on
May 16, 2017
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In our first piece on Blue Diamond Ventures, Inc. (OTCMKT:BLDV), we noted the businesses acquired by this conglomerate and the fact that traders seemed to start recognizing their quality by pushing up the stock price. Our initial thesis seems still valid, as the share price kept increasing.Just recently, the company put out its operational strategies for the year 2017, and we studied its operational strategies to check whether the new highs were not caused by the new information. This article is the result of our research. First of all, have a look at the movement:SourceNew press releaseOn April 26, 2017, the company put out new information. The company changed its fiscal year-end to December 31 from June 30 to match the schedule of the operating business units. In our opinion, the most important reason given for this change was the following:

"The fiscal change gives me a chance to do another year-end review. Although our numbers are public, it helps to review previous news, provide updates, and clarify a few things." Source

We don't see how this change could affect the business and the market performance. Investors can check this academic paper for more information on the subject. Additionally, in the same press release, the company summarized the new strategies for each subsidiary. We selected the most important information, which is provided below:

  • Michigan Cannabis Real Estate: the most relevant news is that the company expects to raise $12 million and the average size of each project is expected to be 50,000 square feet. In addition, it is planned that the company will launch twelve projects in total.
  • Michigan Plant Technologies LLC: the most remarkable information is that the company continues to acquire licenses and the company decided to use them at the locations provided by Michigan Cannabis Real Estate. Some of the most famous brands of this subsidiary are JuJu Joints, AgriHit, which was approved by the FDA, Medtiva and others.
  • Bot Bakery: the good news announced this time is that the company is close to launch its 1st retail store in Chicago.
  • Cannabis Clean: it "doubled their cleaning contracts in the last 6 months and continues to hire personnel at a steady rate".
  • Blue Diamond Consulting LLC (BDC): it was said that BDC had just signed a new contract to do the Master Planning and Construction Management for some land owned by the Victory Christian Center in Pendleton NY. Additionally, the most remarkable information was contained in the following sentence said by Jonathan Alper, Manager of BDC and the Principle of Alper & Associates Consulting:"Land Development for Religious Organizations, including the development of the first residential projects built on leased land in Illinois, is still 50% of our business." Source

Our takeIn our opinion, none of the news reported in the press release changed any thing significant. Hence, we believe that the recent uptrend is still the result of the businesses that the company picked. In addition, we believe the fact that the company opted for developing its business in the Cannabis sector was a great move. It is well-known that the recent legalization of medical marijuana use in the United States is making Cannabis stocks jump. Hence, most of the uptrend may be explained by this reason.Furthermore, the company is a conglomerate, so in order to notice that the company owns interest in this sector, traders need to study every subsidiary. This is the reason that the company keeps moving up little by little, as every time new investors get to know the exposure of the conglomerate to this sector, they decided to buy.Financial situation and shares outstandingAs we did not note the financial statements of the company in our previous article, we are doing it in this update. We could find the last reported statements in the latest annual report, which we could find here. As of December 31, 2016, the most relevant assets and liabilities were the following:

  • Equity investments: $173,000
  • Intangibles: $120,000
  • Total assets: $375,482
  • Total liabilities: $224,903

As investors could notice the assets-liabilities ratio is close to 1.6x, thus the balance sheet is stable. The most important assets are the equity investments. These investments are the subsidiaries noted previously. In addition, the intangible assets seem to be the goodwill derived from the acquisition of the subsidiaries. According to the same report, the company shows the following type of securities:

  • “Super Voting” Preferred Series “A”: 1 share
  • Series B convertible: 64 million issued
  • Common Stock: approximately 4.74 billion issued

In our opinion, the only flaw the company has is the large amount of share outstanding. Additionally, we could not find information about the “Super Voting” Preferred Series “A” share, which is at the moment owned by the CEO of the company. In the annual report, we could not find information about it. We believe that disclosing the special rights of this share would be beneficial for the company as the company will be more transparent.ConclusionWe continue to believe that traders are still discounting the businesses acquired by the company. This time we checked the financial statements disclosed in the 2016 annual report, and found out that the company's balance sheet is stable. Additionally, the amount of intangibles and goodwill is not worrying. We believe that the company is a great pick, and it may be even better if the share count is reduced. To sum up, BLDV may surprise us with new acquisitions that may accelerate the share price growth. We will be updating our subscribers as soon as we know more. For the latest updates on BLDV, sign up below!Disclosure: We have no position in BLDV and have not been compensated for this article.

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