Holiday Shopping and Dance Moms Make 12 Retech ($RETC) a Winning combination

 

  • Fusion of online and offline shopping
  • SEC oversight preventing naked short selling
  • Earning due in near future

 

12 Retech Corporation (RETC) is essentially a fundamental and structural story in a period of seasonal strength.  Today RETC announce that it revamped its Lexi-Luu Dancewear e-commerce site. The website is www.lexiludancewear.com.  This site is dance moms meets Amazon.com (AMZN).  This is a market where money is no object which means margins are incredibly rich for the retailer.  It’s a market where you have to look good and seeing yourself in the outfit and getting buyin from friends on social media is a must.  The other structural issues with the market place is that if you get one you get many. What that means is these girls are basically buying uniforms for their dance class or dance team.  Mixing this retail technology into a retail stores demonstrates the fusion between online and retail. A typical scenario is alpha dance mom and her daughter go into the store. They try on some outfits find the perfect one for her daughter use the RETC instore app and share it.  After some texting back and forth the consensus is to buy this new outfit for the next show. Now the store gets online orders from all the other dance moms and they are shipped to their house or ready for pickup. As an investor if you don’t think this is the perfect demographic to showcase this technology watch one show of the realty TV show dance moms.      

12 Retech Technology – Open air video advertising kiosk on steroids.  

The technology is very versatile but breaking it down you have a big LED screen that is touch sensitive and interactive with a built in camera.  It’s an open air video kiosk on steroids. There are various modes where it flashing picture of outfits that can be purchased but there is also a mirror mode where the shopper gets to take pictures and pose in the outfit they are trying on and then share on social media.  Shopping for fashion clothes is an emotional decision and making the experience fun an interactive pushes the consumer from browser to buyer in an instant. This is a must watch video and show you how the new generation will shop.  

Structural Story

The SEC has been looking into this name in a good way.  The SEC filed action again Wintercap SA last month and is calling for a disgorgement of profits.  What the company allegedly did was sell tens of millions of dollars of restricted stock in various companies that were supposed to be restricted stock.  RETC was just one of them.

 

They allegedly broke the stock certs up into smaller amounts to avoid detection.  This is the primary reason the stock price go clobbered so bad. This trade still need to get unwound because the underlying shares should never have been sold.  So there is at a minimum an 18 million share short in this stock just from Wintercap. The litigation hasn’t been resolved but the court filing are looking very grim for Wintercap.  On October 26, 2018 the SEC filed for a preliminary injunction to freeze all their assets and got it. The significance of the SEC in the stock price is that they are watching intently for any additional selling in violation of the restraining order so no naked short firm would want to touch this stock.  

Market Structure

There are 1.0 billion shares authorized and have 401 million shares outstanding as of November 2, 2018.  The float is currently 322 million. There are 78.6 million restricted shares. Over the past month the share count has risen exponentially as it appears the company was doing some sort of ATM fundraising.  The terms should be clearer when the next quarterly report it due in the subsequent events section. It appears that most of the selling started in October and based on the most recent share count ended then.  With close to 250 million shares issued assuming an average price of .004 they likely have about $1.0 million invested in this concept to kick it off. With a market cap of $1.2 million their likely enterprise value is only $200K assuming they raised $1.0 million in funds to buy equipment to scale the technology quickly.  They could be raising money right now but investors have to ask does that make sense. The volume recently came to a grinding halt and dilution is impossible under those circumstances. The more likely scenario is that the company has enough funds to prove out the concept and get orders.

Investment Summary

Brick and mortar stores are closing in epidemic fashion.  This technology serves as a lifeline to keep them relevant and actually differentiate themselves.  It’s just a matter of time before a retailer grabs this technology and want to implement it into their stores.  This is a shovel ready product ready for prime time distribution. The Lexi Luu store is a showcase for the technology.  With quarterly results due out soon this is one to watch with very little downside and tremendous upside from here. Although we don’t know there was an investment in the technology signs point to it and if you look at the quality of the marketing presentation its not hard to realize that adoption will be high.  This investment represents a great risk to reward profile.

 

Disclosure: The owners of PSInvestor have NOT been compensated for this article by the company or a 3rd party, although the owners do hold a LONG position in the company in which we may buy more, sell all or sell a portion of the position at any time. To read our FULL DISCLAIMER, click here.

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