MICT Stock: The Next AMC-Like Opportunity

MICT Inc (NASDAQ: MICT) has been an interesting stock to watch as of late. I’ve been following the stock for some time now, and the fundamental picture is impressive. Yet, short sellers seem to be driving the price of the stock to tremendous lows. 

Nonetheless, this creates a compelling opportunity. 

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MICT By The Numbers

Any time an undervaluation is argued, the numbers have to prove the argument. So, let’s look at the numbers shall we?

At the close of 2020, MICT had about $29 million in cash on its balance sheet. In 2021, another $114 million or so was added, bringing that total to about $143 million. Of course, in Q1, there have been costs, and I would venture to say that at present, the company has about $124-$126 million in CASH still sitting on its balance sheet. 

At present, the stock trades with a market cap of just about $150 million. When factoring in other assets owned by the company, it’s market cap represents about its total asset value, if not a bit less. 

If that’s not an undervaluation, I don’t know what is!

At the same time, there have been massive news releases that suggest there are blue skies ahead:

  • Insurance. The company’s insurance arm is expanding significantly, going from a regional business to a national business; a move that’s expected to lead to tremendous revenue growth and better margins. 
  • Commodity Exchange. The company’s technology is also ramping up to facilitate about 20% of the trades that go through the Shanghai Petroleum and Natural Gas Exchange, offering yet another opportunity for a significant bump in revenue. 
  • Trading Platform. Finally, the company announced that it would be running beta tests on its trading platform. Considering the time that has lapsed, I would imagine that those tests are ongoing. Considering the average time it takes to do these beta tests ranging from 6 to 12 weeks, I would say we’re nearing the end of testing and the platform will be launched in the coming weeks. 

Keep in mind, we’re not talking about a company that’s trading with a market cap that represents multiples of its cash reserves, we’re talking about a company that from simply an asset value standpoint, is under water. This means that the coming trading platform, the strides made in the insurance industry, and the commodity exchange are essentially trading with NO VALUE. That’s absurd!

Acquisition Potential

There hasn’t been any chatter about acquisitions, and rightfully so. The company hasn’t announced an intention to seek alternatives, and why should it? Things are going well. 

Nonetheless, there’s a very real argument here that if there ever was a potential acquisition target, MICT is it. 

Think about it. There are massive, billion-dollar players in the chinese trading platform industry that couldn’t hold a candle to MICT. The company was granted one of the hardest licenses to get its hands on, the Hong Kong securities license, and doesn’t have to share its data, or jeopardize margins to operate like the only other competitors in the region do like tyga. 

Why wouldn’t a big player want the company. 

Not to mention, there are some big players in the insurance space that would benefit greatly from the company’s portfolio, and with a market cap so close to asset value, a significant premium could be offered without breaking a sweat. 

Short Squeeze Potential

Another thing you have to think about here is the potential for a short squeeze. It’s clear that where it stands right now, MICT stock is significantly undervalued. Nonetheless, heavy short positions have been driving the price of the stock down. 

That won’t last forever. 

All it would take is a piece of news like earnings to show the significant growth in insurance revenues that many are expecting, or the announcement that the trading platform is being launched, and demand for the stock would likely easily outweigh supply, leading to significant gains and a short squeeze as short sellers abandon their positions, resulting in the purchase of about 30 million shares which are held short. 

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The Bottom Line

The bottom line here is that no matter how you slice it, MICT stock is hard to ignore. The company is firing on all cylinders, fulfilling its promises, and doing so on a strong financial foundation.

Moreover, while the stock is significantly undervalued, manipulation from short sellers seems to be at the level of what we’re seeing with AMC. However, the opportunity might be even larger. After all, should the retail community band behind MICT, pushing the shorts to cover their positions, where will they find 30 million shares to cover their downside bets?

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CNA Finance is not an investment advisor or broker dealer. This article does not constitute a recommendation to buy or sell any securities mentioned. This article is the result of a monetary relationship between MICT and CNA Finance. Trading in penny stocks involves significant risk and can lead to the loss of capital.