Remember Sacks Parente? A Follow Up
Sacks Parente was the hottest IPO in 2023. Here is how they are doing now.
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Hey Golfers —
Golf company Sacks Parente was the hottest IPO in 2023 — up over 600% on its first day of trading. It was one of the most interesting stories in golf last year.
Golf companies rarely go public, let alone go up 600% on its IPO day. While that will catch almost anyone’s eye in the golf space. Other metrics caught my eye.
The company did $190,000 in revenue in 2022 and had operating expenses of $2.9 million. Sacks Parente had a net loss of $3.5 million in 2022 with $171,000 in cash.
Yet, on its IPO day, Sacks Parente had a market cap of over $400 million.
To put it in simpler terms. A golf company had a 2,100x revenue multiple on its valuation.
Golf companies don’t really trade on revenue multiples — but for context, here is Acushnet and Callaway’s revenue multiple.
Acushnet — 1.64x
Callaway — .46x
Sacks Parente raised $12.8 million in its IPO. After deducting the underwriting discounts, commissions, and transaction expenses, they were left with $11.6 million. They spent around $1.2 million to raise money and go public — six times their revenue in 2022.
Now that the paint has dried — how is Sacks Parente doing?
Not too far after its massive run-up — Sacks Parente came down significantly, giving away all of its IPO gains.
At its peak — Sacks Parente traded at $27.60 per share. The company now trades at $1.69 per share. A decline of of 94%.
But there is more to the story — Sacks Parente did a 1-for-10 reverse stock split. This means that if you had ten shares before the stock split, you now have one.
There are several reasons why companies do stock splits. They most likely executed a 1-for-10 reverse stock split to get the stock price back above $1.00. A company that trades for less than $1.00 for an extended period risks getting delisted.
Today — Sacks Parente’s market cap is $2.47 million. The market cap on Sacks Parente is down over 99% since its IPO day.
Over the last 12 months, Sacks Parente has shifted its strategy and even rebranded. The company rebranded to Newton Golf and is focusing on the golf shaft market.
The company has seen positive results.
In the second quarter, they generated $813,000 in revenue. In the same quarter in 2023, they recognized $47,000 in revenue, an increase of 17x.
And for the first two quarters of 2024, around 80% of its $1.163 million revenue was from golf shafts. They make their Newton golf shafts in America. Side note — I actually played it this summer and was happy with how it performed.
Let’s look at Sacks Parente’s last quarter.
Revenue has accelerated — and most certainly a positive for the company. But they’ve spent a significant amount of money to achieve that 17x growth. They lost $1.2 million last quarter.
And they have lost nearly $2.5 million this year on total sales of $1.163 million. Their margins are healthy at 60%. But their SG&A expenses are $2.75 million — 2.3x their revenue.
Sacks Parente has $2.8 million in cash, down from $5.3 million on December 31st of 2023.
If we look at their last six months and use that as a benchmark for the next six months, we could expect Sacks Parente to have around six months left before they run out of cash.
The company announced last week that it raised $732,000 in cash in an underwritten public offering.
Sacks Parente is in constant need of cash. One of the reasons it went public was to bolster its cash position. And now, just a little over a year later, it has done another capital raise.
The company has improved its margins and significantly accelerated its revenue. But until it can reduce its quarterly losses, it will be battling cash flow issues to remain a viable organization.
Today, its $2.47 million market cap reflects the organization more accurately than it did at over $400 million.
The run-up is one of the great mysteries that has yet to be solved. I spoke with a couple of members of their executive team — they couldn’t explain it either.
Have a great Tuesday. We will talk to you next week!
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A strategy shift and rebrand after just a year? Sounds like a flailing business with overtones of “pump n’ dump.” $400 million market cap? That’s pure delusion.