BRIEF: Mezzi Holdings – From Handbags to Blockchain?

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It seems the talk of the twittersphere this weekend is that of Mezzi Holdings Inc (TSXV: MZI). This is the result of a news release issued on Friday, indicating that they had assigned a new member to their advisory board. This individual, Mr. Gary Boddington, has experience in the blockchain sector. This coincides with Mezzi’s plan to enter the blockchain and cryptocurrency sector.

 

From handbags to blockchain?

The market reacted as expected on Friday with the release of this news. At the close, it was up 92% to $0.25, which was also the high of day. This serves as another example of why the markets are irrational. What business does a handbag company have in the cryptocurrency sector? How did it get to this point?

Mezzi Holdings has been in the personal accessory market for a couple of years now. Its primary focus is that of handbags that have been integrated with “smart” technology. This amongst other things included the capability for the bag to charge a cell phone or other small device. In addition to this, it also had a line of sun and optical eye wear accessories. In general, they were focused on selling luxury accessories to millennials whom feel the need to always be connected.

Then, in early April 2017 the company announced that it had initiated a strategic review. The review was intended to re-evaluate their market position, and to look at other sectors that may better capture shareholder value. Shortly thereafter, an e-commerce company was acquired which could be considered a related purchase.

Apparently, that wasn’t what the company had in mind. On July 18th, they announced a private placement. The proceeds of the equity raise were to be used to acquire investments in potentially the e-commerce, cannabis, or blockchain/cryptocurrency sectors.

Mezzi Holdings July 18th news release snippet.
Mezzi Holdings July 18th news release snippet pertaining to the potential change in business.

 

Evaluation of the announcement..

In other words, the officers of Mezzi Holdings were looking to capitalize on currently flourishing industries. Rather than provide shareholder value in their current industry, they wished to sell off current holdings and perform a change of business. By capitalizing on the use of current market buzzwords, the goal was likely to generate some buzz to provide investors for their private placement.

Perhaps the most confusing part of this realignment of the business, is the company’s current industry. The management at Mezzi Holdings has been involved in personal accessories, a completely unrelated field to that of the sectors under consideration. Furthermore, they actually have revenue. It’s true that many companies rush from one hot industry to the next in the hopes of striking it rich. However, these companies typically have little assets, and almost never have any revenues. It’s true, no one at Mezzi Holdings was getting rich off of the revenues the company was generating. However, it had a sufficient base to grow the company out from.

Instead, Mezzi Holdings chose to quietly sign a letter of intent to sell the assets it had related to luxury accessories. This was done without a news release to alert its shareholders. Instead, it was buried in financial documents filed on SEDAR. It was listed under the “subsequent events” section of the July 31st, 2017 interim financial statements. The document was published to SEDAR on September 29th, 2017.

Section outlining the letter of intent signed to sell the luxury accessories subsidiary of Mezzi Holdings. Snippet from the July 31st, 2017 interim financial statements.
Snippet from the July 31st, 2017 interim financial statements regarding the signed letter of intent.

So much for that line about looking for value for investors huh? There’s nothing like selling the focus of your business and then hiding it from your shareholders. News as significant as this should undoubtedly be released to the public, so that shareholders can properly evaluate their investment.

 

Conclusions

Mezzi Holdings, by all appearances, is just another company looking out for itself.  It’s a story retold time and again, of a small company swapping sectors to chase whatever is the hot industry. It’s focused on finding a quick path to success, rather than being focused on building something tangible from the ground up. Cryptocurrency or blockchain is just another path towards that potential quick success and the rags to riches story.

As for the unbelievable gains the share price saw on Friday, in all likelihood it is the result of stock traders capitalizing on these same buzzwords. In a weeks time, these traders will have all but forgotten Mezzi Holdings, if they even knew anything about it to begin with. So goes the story of the company that chased the latest fad.

 

Don’t follow the crowd. Invest your money in solid companies. Dive Deep.

 


Information for this briefing was found via Sedar and TMX Money. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell.