Big Wind Capital (CSE: BWC) is a stock that got us excited. That doesn’t happen often when speaking to blockchain and crypto currency plays in this emerging market. It checks several of the boxes that the sector requires: history of success and implementation, government contracts, and a high level of security. In terms of security, its a critical dose of exactly what the sector needs. This is evident based on the latest hacking which occurred just last week to the tune of $50 million.
At least, this is the information that was disseminated across the twittersphere. After perusing the files available on SEDAR, this information was confirmed via a news release dated July 4, 2017. This release outlines the initial letter of intent signed between Big Wind Capital and Hill Top Security, the acquisition target.
What was not disseminated within the twittersphere, is one crucial aspect. The deal has not yet been closed. At this point, a definitive agreement hasn’t even been signed.
UPDATE 12/18/17: Recently, we were contact by the CEO of Big Wind indicating a correction was required. He stated that the reasoning behind the lengthy raise was related to that of the CSE not being satisfied. Although it was not elaborated upon, he stated that the investors were present and waiting for financing to close. There was also an issue related to completing audits. Keep that in mind as you read the article below.
The Risky Investment that is Big Wind Capital
The Letter of Intent
The story of Big Wind Capital’s involvement in the blockchain sector begins with a letter of intent. As previously addressed, this was made aware to investors on July the 4th. The agreement, which was between the company and Hill Top Security is a bit of a convoluted. This is a result of Hill Top Security having dealings with the U.S. government related to security, which requires the company to be U.S. owned.
Hill Top Security is a firm heavily focused on increasing security over the internet. To perform this enahanced cyber security, it focuses on the use of blockchain amongst several other things. It’s platform is said to be of military grade, and was created through the use of security experts from several U.S. government agencies. It is currently in used by undisclosed arms of the U.S. government, and the company holds a top secret security clearance.
Under the terms of the letter of intent, the company is to initially acquire 25% of Hill Top Security, for a total sum of $660,000. This will be in the form of cash. Upon the completion of this, Big Wind Capital will then possess the exclusive rights to obtain the remaining 75% of the companies assets, minus its assets used for servicing the U.S. government. Payment for this portion will be conducted through a $1.5M cash investment in the remnants of Hill Top Security, in addition to issuing 45% of the outstanding shares of Big Wind Capital to Hill Top Security. This will also result in the company holding a 49% stake in what is left of Hill Top Security.
The completion of the agreement requires that the company raise $1,000,000. $660,000 of this will be used for the acquisition, with the remainder going towards working capital and development. Lastly, the company agreed to deliver $100,000 of the initial payment by July 6, 2017.
Big Wind Capitals Financing Issues
The financing related to this transaction has been a mess at the very least. It has been plagued by investors not buying in, repeated changes in the value of shares, and extensively long periods of open raises. To make it easiest for views to follow, we’ve summarized it in bullet point form below as best we could.
Additionally, it should be noted that the $100,000 USD required to be issued by July 6 was covered by the CEO of the company. A promissory note was then entered between the two parties for the total sum, on a non interest bearing basis.
- July 4, 2017: Initial placement announced for proceeds of $1,000,000. Units are priced at $0.15 per share, with no warrants attached. Funds are to be held in escrow until the transaction is approved by the CSE, on terms described in the future definitive agreement. The units are subject to an eight month and one day hold period following the date of distribution.
- July 17, 2017: Placement is increased by $500,000, with the additional funds priced at $0.40 per common share. The same terms otherwise apply.
- October 16, 2017: The $0.40 portion of the financing is modified. The price is reduced to $0.35 per share, and includes a purchase warrant valid for two years at a price of $0.40. The size is also increased to up to 5,000,000 units, or $1,750,000 for this portion of the raise. Warrants have a forced conversion clause should the price of the stock exceed $0.80 for a ten day period.
- November 7, 2017: First tranche of private placement closes. Total raise was for $500,000, and 3,333,333 shares at a price of $0.15 per unit.
- November 24, 2017: Second tranche of private placement closes. Total proceeds equate to $493,357 in exchange for 3,290,247 units at a price of $0.15 per share. As a result of this tranche closing, Big Wind Capital advanced $600,000 to Hill Top Security.
- November 30, 2017: First tranche of the $0.35 raise closes. Total units sold is 4,377,299, with each unit comprising of one share and one purchase warrant, priced at $0,40. The total proceeds from this raise amounts to $1,532,054.
Currently, it is believed that there is still an ongoing raise in effect for Big Wind Capital. Although the company stock closed at a price of $0.80 per share on December 8, it appears investors are gun shy when it comes to locking their funds up for long periods of time in this sector. This is likely due in part to the volatility seen by listings in the sector.
Big Wind Capital’s Current State
Although the initial investment funds have been sent to Hill Top Security by Big Wind Capital, there is still no definitive agreement in place. As per the letter of intent, without a definitive agreement being established no portion of the transaction can occur. By these standards, Big Wind Capital is still not in the cryptocurrency or blockchain market. It has repeatedly issued news releases pertaining solely to Hill Top Security, however as a result of the transaction not closing the news rings a little hollow.
It seems large investors take a similar standpoint. The fact that it took over four months for a $0.15 raise to occur speaks volumes, considering that the share price of the stock itself was at times more than three times this price. It may also speak loudly to the blockchain sector itself: traders will gladly buy in at this stage, but bigger investors are being much more cautious with their entry to the sector, and are put off by long hold periods. The sector is still seen as very much too risky. Only when the soaring price of Bitcoin was perpetually reported by the media did Big Wind Capital manage to close their raises.
As it stands, the only value Big Wind Capital possesses for investors is a piece of paper indicating their intent to acquire a portion of a company. Should a definitive agreement never be signed, the value of the equity will likely plummet, leaving behind countless bag holders.
“…there is no clarity surrounding what Big Wind Capital actually gets out of the deal.”
Additionally, it is not clear what exactly Big Wind Capital is acquiring here. Due to certain assets marked to remain with Hill Top Security, there is no clarity surrounding what Big Wind Capital actually gets out of the deal. The most significant part of the company is undoubtedly remaining within the confines of Hill Top Security. Until a definitive agreement is signed, its nearly impossible to place a value on this potential transaction.
If anything, investors are looking to invest in Hill Top Security, not Big Wind Capital. We’d willingly invest in this company ourselves. If you think that it’s Big Wind Capital that investors are actually after, you’re fooling yourself. Therefore, there is currently a large risk in investing with Big Wind Capital at this point in time. Should the transaction occur to the fullest, it just might be an excellent bet. Until then, investors are surely playing with fire.
Reading the details is important, don’t just get your information from the twittersphere. Dive Deep.
Information for this analysis was found via The CSE, SEDAR, and Big Wind Capital. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.