This CEO Says His 5 Cent Stock is a Giant Killer

One of my biggest lines in the junior stock market is—people are the most valuable commodity.

That could not be more true than with Venzee Technology—VENZ-TSXv—which trades as a meager 5-cent stock.

The new CEO, John Abrams, is not quite halfway through his turnaround of this fledgling technology company, which uses its proprietary AI software to automate product information flow between businesses. But I think he truly is on the cusp of success.

Venzee is a typical junior tech story. A creative founder didn’t have quite the right business model for a neat technology. Stock collapses to pennies within a year of IPO. Investors stunned and angry. A new CEO is found–one with BIG company experience that the Market will like. But not only do they have to turn the business around, they have to raise money to keep it all going until profitability.

I’ve seen it many, many times in my 30 years in the Markets. But I have not seen one turn around quite as quickly as Abrams is doing with Venzee.

Abrams has been a senior executive in more than US$6 billion worth of transactions, working with Tribune Company (what is now TRCO-NYSE and TPCO-NASDAQ), McDonalds Corp. (MCD-NYSE) and Cardinal Health (CAH-NYSE).

When Abrams saw what Venzee’s technology could do—automatically translate supplier product info into retailer language—he knew they were unique, disruptive, and they were giant killers. 

He came on as CEO and, in less than a year, has completely changed the company’s strategy, revitalized the board of directors with industry leaders from his network, and dramatically reduced costs in sales and tech support. The next quarter, he says, will show the type of revenue growth the market has been waiting for since going public in early 2018.

“We are the beginning of a foundational shift in how trade information across the retail sector is shared,” he said in an interview this week. 

“The shift to deep, persistent, and intelligent integration between manufacturers and sellers will happen across all industry sectors—healthcare, durable goods, automotive—but we’re starting in retail with a focus on fast-moving consumer goods, and grocery.

“These are areas where there is a lot of pressure for rich, consumer-focused content and where legacy processes fail. And, as this shift to integration takes hold, we’ll make a ton of money.”

Abrams won’t name which mega-retailers are integrated with his platform, but he says Venzee’s AI software is already connected with all 250 of the biggest retailers in the world—with Venzee’s next goal to complete integration to more than 10,000 retailers.

Venzee charges US$250 for each “end-point” or retailer a supplier wants to sell to. Venzee has suppliers in their customer mix right now who want to sell to 2000 retailers. 2000 x US$250/month = a hypothetical US$500K/m or US$6M per year—for one customer. The numbers can scale up very quickly says Abrams, and that was one of the main reasons he came in as CEO.

According to Abrams, the efficiency and cost savings for businesses using Venzee’s technology is hard to underestimate. It’s a bold statement for a CEO with a 5 cent stock. It gets grander:

“I think our platform will unlock a layer of global trade, a layer of new sales, a layer of fundamentally new expression of product information on a global scale that will change how retail trade takes place.

“You’ll be able to understand products and transact a sale in more places, with better accuracy and do so more efficiently. And, you’ll do it without a ton of humans in the back office slowing down commerce.”

When you think that just ONE product on a store shelf at a retailer like Michael’s or Target can easily have 60 (sixty) bits of information attached to it—and there are obviously tens of millions of products and billions of SKUs—managing that content manually is a huge problem for commerce. 

Venzee automates the movement of product information from manufacturer to retailer. They use artificial intelligence (AI) to figure out the differences between how a manufacturer describes a product and what a retailer needs to convey to the consumer or use for its own business purposes. 

Abrams likens it to banking—25 years ago, you had to go into a branch and talk to someone to do every-and-anything. Now you do most of it online. Now entire banks are online! 

Most financial transactions are communicated over a backbone called SWIFT. That backbone provided the integration needed to automate transactions and displace manual banking processes. Today there are very few back-office staff at a bank compared to years ago. That whole back-office sector of banking has been hollowed out, and that will now happen in retail and other sectors, says Abrams.

If this software is so important and valuable, then why is this a 5-cent stock with a skimpy balance sheet? Why isn’t it a US$20 concept stock on NASD?

“Venzee was trying to sell a complex platform to mom and pop manufacturers making one or two SKUs,” Abrams says. “That just isn’t a model that scales. Communication between brands and retailers is difficult at all levels, but the larger the brand, the more acute the pain. So, if you’re not selling at the enterprise level, with a solution like this, you’re just aimed at the wrong thing.

“We were spending a lot of time helping small operators understand the data that they had, and that is just a very costly, very slow endeavor. We shut all of that down.”

Abrams says that expensive sales and support teams are now almost gone. And the platform is fully operational, so the capital they’ve expended on R&D since going public two years ago should be the end of that big expense. 

Even with all that, they’re not quite at break-even, so he does expect an additional capital raise. But he is not worried about the company’s survival.

Venzee spent 2019 bringing on partners, integrating those partners, and connecting them to their platform. Now Abrams says they are cranking up revenue.

“And we’ll turn the crank even harder and faster as we go through the year. As we continue to add retailers, we’ll continue to draw in more manufacturers and more partners who want to get to those retailers in a more efficient way.”

DISCLOSURE: I do not own Venzee.

 

Keith