Miami, FL – September 7, 2018 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on Remark Holdings, Inc. (NASDAQ: MARK).
Since originally conceived in the 1950’s, Artificial Intelligence or AI has increased its popularity, underpinned by increased computing capability, enormous data volume requirements and advanced algorithms. Through AI, businesses can gain insights into consumers’ behavior to generate customer loyalty and improve sales.
Global market intelligence firm, International Data Corporation predicts that AI spending is expected to grow to $52.2 billion in 2021, or a compounded annual growth rate of 46.2% over the 2016-2021 forecasted period. One of the main beneficiaries of increased AI spending is a Nevada-based company named Remark Holdings (NASDAQ: MARK), who has notable AI exposure through its KanKan platform.
What is KanKan?
KanKan originally started as a mobile app, aggregating public posts from major social media platforms, but later transformed into a technology platform with multiple AI functions. In a relatively short amount of time, KanKan managed to sign deals with some top-tier companies in China and South Asia namely:
- In January 2017, KanKan collaborated with Tencent to co-develop a data-driven precision marketing solution that can serve business in a variety of verticals.
- Also in January 2017, the company partnered with Alibaba (NYSE: BABA) to provide customers with new business-to-business (B2B) data solution.
- The company disclosed in October 2017 that KanKan is partnering with Acxiom (NASDAQ: ACXM) to provide research and target solutions for a list of clients.
- In September 2017, one of the largest Chinese owned enterprises signed a contract with KanKan to provide facial and object recognition technology to a Shanghai municipal health agency for regulatory purposes.
- In May 2018, Thailand-based CP ALL Public Company disclosed that they are deploying KanKan’s data intelligence and AI technologies in approximately 11,000 7-Eleven stores that CP ALL operates.
With the successful deployment of the KanKan platform across China and South Asia, management expects AI segment to generate approximately $25 million to $30 million in 2018. Taking into account on the agreement that they have signed with various entities, the company is expected to report recurring upfront and licensing fees from the platform.
There are quite a number of investors, don’t believe MARK’s AI storyline confirmed by a relatively high short position of close to 15% of the public float. An independent boutique research firm, J Capital published a report several months ago, challenging the company’s AI claims. Their main argument is that MARK’s AI storyline seems hard to believe, as it would be operationally improbable for KanKan to become a major AI company in a short time span with their scarce resources.
According to J Capital, their channel checks casted doubts on the existence of KanKan’s agreements with several Chinese companies, and the aggressive deployment of the platform across China and South Asia.
To disprove the equity report, MARK issued a press release describing the boutique firm’s report as “seriously misleading, and contains numerous factual misstatements.” The response might have come a little late, since the company’s market reputation has been tainted by these allegations.
Did Investors throw the baby out with the bathwater?
With the constant flow of negative KanKan news, investors have likely also written off MARK’s non-KanKan investments, which seems unwarranted. Through the years, MARK acquired attractive domain names, and ownership in several online and digital businesses. For instance, the company has 5% stake in a privately held company that operates a healthcare app for users, and an online travel agency based in Las Vegas, Nevada.
Though a back of an envelope calculation, if combined, these businesses would appear more valuable relative to MARK’s market capitalization, as shown in the below:
|Investment||Value||Value Per share||Method|
|5% stake in Sharecare||$100 million||$3.03||KKR’s acquisition price of WebMD|
|Vegas.com||$140 million||$4.24||Revenue multiple of Expedia|
|$26 million||$0.78||Sales of similar domains|
While there are doubts on the reliability of their AI storyline, investors shorting the stock are missing the hidden value, as the company still has other investments on their balance sheet. If management can monetize these investments, we are looking for the share price to move up to $8.00 per share, or 142% hike from current share price levels.
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