Cecilie_Arcurs/E+ via Getty Images

Cecilie_Arcurs/E+ via Getty Images

Metro One Telecommunications (OTC:WOWI) has filed to raise $12.6 million in an offering of its common stock and warrants, according to an S-1 registration statement.

The firm provides a mobile commerce platform for retailers.

Given many uncertainties as to the company’s trajectory and stock dilution upon completion of the offering, I'm on Hold for the offering.

Sheridan, Wyoming-based Metro One was founded to acquire and develop technologies that assist retailing organizations to easily create a mobile phone-centric presence that better engages their customers and prospects.

Management is headed by Chief Executive Officer Bianca Meger, who was previously involved in the launch of Motorola's mobile distribution system in Angola and has been a Chief Marketing Officer for various unnamed tech companies in Israel.

The company’s primary offerings include:

Metro One has booked fair market value investment of $137.2 million as of September 30, 2021 from investors including GT Ventures and various individuals.

The firm acquired the assets of Royal App in early 2021 and is seeking to modify and improve the system as a basis for its offerings.

Metro One has begun generating revenue through an in-house sales and merchandising team and has plans to further market its offerings through events, sponsorships, digital marketing, social media and traditional media channels.

According to a 2022 market research report by imarc, the global market for mobile commerce was an estimated $834 billion in 2021 and is forecast to reach $4.7 trillion by 2027.

This represents a forecast CAGR of 33.4% from 2022 to 2027.

The main drivers for this expected growth are a growth in the preference of using mobile apps and software for a wide variety of commercial operations, including banking, in-app purchases, digital wallets and marketplaces.

Also, the market is facilitated by the integration with point-of-sale [POS] terminals that process transactions using near-field communications [NFC] technologies.

The company’s recent financial results can be summarized as follows:

A small amount of topline revenue

High cash used in operations

Below are relevant financial results from the firm’s registration statement:

Statement of Operations (SEC EDGAR)

Statement of Operations (SEC EDGAR)

As of September 30, 2021, Metro One had $449,574 in cash and $666,617 in total liabilities.

Metro One intends to raise $12.6 million in gross proceeds from an offering of 80 million shares of its common stock and 20 million warrants at $0.12 per share.

Purchasers of the stock will receive one warrant for each 4 shares of stock purchased, and the exercise price of the warrants will be 125% of the offering price, or $0.15.

No existing shareholders have indicated an interest to purchase shares of the offering. Instead, selling shareholders intend to sell large amounts of shares into the offering.

The company is also registering shares sold via a 2021 PIPE (Private Investment in Public Equity), via previous SAFEs (Simple Agreement For Equity) and for shares tendered in the acquisition of Royal App.

The stock is currently quoted on the OTC under the ticker symbol “WOWI” and its closing price on June 14, 2022 was $0.10 per share.

Assuming a successful offering at $0.12 per share, the company’s enterprise value would approximate $30.5 million, excluding the effects of underwriter over-allotment options.

The float to outstanding shares ratio (excluding underwriter over-allotments) will be approximately 23.7%. A figure under 10% is generally considered a ‘low float’ stock, which can be subject to significant price volatility.

Management says it will use the net proceeds from the offering as follows:

We intend to use substantially all of the net proceeds from this offering to fund business operations, including the development and sale of our products, and for working capital and general corporate purposes.

Regarding outstanding legal proceedings, management did not provide information about the status of legal proceedings against the firm, if any.

WOWI is seeking public market investment to fund its unspecified corporate growth plans.

The firm’s financials have produced a tiny amount of topline revenue, material operating losses and significant cash used in operations.

The firm currently plans to pay no dividends on its shares and anticipates that it will retain future earnings, if any, to reinvest back into the business.

The market opportunity for providing mobile commerce software to companies is large but highly fragmented.

The primary risks to the company’s outlook are its tiny revenue history and the apparently unfinished nature of its mobile platform offering.

As for valuation, management is asking public investors to pay an Enterprise Value of around $30 million, despite having very little revenue, significant operating losses and no clear differentiation.

There are numerous major platforms for providing a mobile presence to companies of any size, and the cost of acquiring clients is relatively high unless your process is completely automated, which the large platforms are.

Also, selling shareholders will account for a very large increase in stock float, so it is difficult to ascertain what the stock will trade at after the offering, due to so much dilution.

Given so many uncertainties, I'm on Hold for the offering.

Expected Offering Date: To be announced.

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