Seven Arts Entertainment Inc. (OTC Pink: SAPX) moved higher by more than 30% into the close last week and held its gains at $0.0047 entering the new week. Indeed, while the increase is a sizable move, the newly managed company may still be far from reflecting its actual intrinsic value. However, with new CEO Jason Black committed to getting his company regulatory compliant and positioned to maximize multiple market opportunities, SAPX may be on course to increase shareholder value sooner rather than later. Thus, its 30% increase may only be a prelude for more significant gains to come.
The surge came after Seven Arts provided an optimistic update saying that it made its requisite annual filings current, paid its fees to the OTC markets to retain its listing, and took steps to reduce its authorized share count. All of that is excellent news.
Still, while that may appear as though the CEO was making up for past mistakes, that's nowhere near accurate. Instead, consider SAPX reborn, returning to the markets with a new CEO intent to maximize the value of an already impressive entertainment property portfolio.
Consequently, looking back to evaluate this proposition is the wrong play. Instead, look at SAPX as a 2H 2021 investment consideration, with its new CEO doing more in 45 days than his predecessors did in years. Better still, he plans to do a whole lot more.
And keep in mind, the progress made since June goes well beyond bringing corporate matters up to date. In a July update, SAPX announced, among other things, its intent to monetize untapped value from its impressive library of titles. They also made a revenue-generating acquisition expected to bring a new income stream to the company expected to hit this quarter.
Thus, with SAPX executing its ambitious mission timely and adding revenues simultaneously, its sub-penny share prices look fundamentally flawed in presentation of value.
Believing In Its Future
Of course, despite the green light, investing in SAPX at this stage is for those willing to add risk to their portfolio. But, it's a similar risk that investors took when investing in "struggling" companies like Apple (NASDAQ: AAPL) the second time around and Domino's Pizza (NYSE: DPZ) after it changed its CEO. There, too, were more naysayers about the future of each than there were cheerleaders. Fast-forward, both companies are leading players in their sectors.
As an analogy, just as those companies provided clues for why to stay invested, SAPX is following suit with guidance helping investors to determine that at current levels, the investment opportunity may be too big to ignore as well. If so, the returns could be nothing short of exponential.
Moreover, its 30% increase in price during the past three trading days with no supporting news may be a message as well. Stay bullish.
A Different SAPX As Of June 2021
Know this: SAPX is a retooled company from the top-down. Most important, like Apple and Domino's at the time, SAPX also has new leadership that has set into action a new plan to maximize the value of its assets and public listing. Yes, Black is under some time pressures to rectify parts of the past, but he is doing what needs to be done to get SAPX on track. Actually, his speed in putting SAPX in a position to succeed is impressive.
Moreover, his work has tangible value. And as he reaches new milestones and clouds of uncertainty evaporate, he is putting SAPX shares in a position to surge. And accounting for its assets, partnerships, and recent acquisitions, they should.
Hence, while the share price says otherwise, the next few weeks could be a transformational period for SAPX. Moreover, for traders that like to position ahead of potential catalysts, investment at these levels could be the difference in earning impressive gains compared to exponential ones.
Keep this in mind when considering the investment. Investing in SAPX is not blind ambition. Its new CEO is getting things done, and that could translate to substantial long-term shareholder value. Moreover, with Jason Black acting aggressively to rejuvenate SAPX, that value may come sooner rather than later.
Acquisitions, Filings, And New Management
In fact, the fruits of his labor are already showing. Since June 2021, Black has been making moves to bring his company back to life. His first order of business was to submit required regulatory filings, complete listing compliance applications, pay delinquent fees to OTC Markets, and enlist a new transfer agent to settle up its capital structure. Mission accomplished!
By any measure, that's quite a bit of progress in under 60 days. And while he still has some work to do to get SAPX fully compliant by the end of September, the great news is that he is optimistic enough in reaching that outcome that he is making revenue-generating deals at the same time.
Last month, SAPX announced expanding its production capacity by acquiring Atlanta-based film and music studio Muse Media LLC. That deal brings immediate revenue-generating firepower to SAPX. Also, it allows SAPX to leverage the Muse asset portfolio and tap into Muse Media's expertise in commercial, broadcast,docu-series, and music video production.
Moreover, from a revenues perspective, that deal adds a semi-recurring income stream that provides supplementary cash flow during major feature production runs. More importantly, it allows SAPX to quickly expand its presence in the film and music production space to maximize its opportunities locally and nationally. Benefiting from excellent management also comes with that deal.
SAPX noted that Muse Media will be led by Atlanta-based cinematographer Matt Bryant, an award-winning producer, celebrated musician, and documentarian. His work was featured at the Cannes Film Festival in 2020 and brought a wealth of experience to the SAPX family. Better still, Bryant is familiar with success, having been involved from the top-down in creating profitable and compelling content for broadcasters and clients alike. As noted, Muse adds a number of tangible assets as well.
Those are value drivers as well.
Leveraging Assets In Q3 and Q4
Muse already works out of two state-of-the-art facilities in the greater Atlanta area. Its film production studio features a sound stage equipped for advanced motion graphics, compositions, high & low-key production and has featured some of the most prominent celebrities from around the states. Keep in mind, with CGI and green-screen production, SAPX can maximize the value of its studios from Atlanta, a market experiencing tremendous growth in media, video, and music production.
Its music recording studio is equally impressive, boasting a fully equipped two-level production facility explicitly built and designed for album quality sound engineering. Moreover, unlike most traditional recording studios, the Muse facility is considered "massive" by comparison. It's so large, it has the space for the in-house recording of full bands and solo recording artists alike.
That's an advantage unique to Muse in the Atlanta market. Moreover, combine its studio value with its incremental revenue contributions to SAPX, the current share SAPX share price looks tremendously undervalued. And that's not all from that deal.
Don't leave out the value from Muse fitting perfectly into SAPX's long-term business plan to capitalize on changes in how content is produced. As noted, green-screen and CGI allow content to be produced almost anywhere at any time. And with the Atlanta markets becoming a hotbed of music and video production, SAPX made the right acquisition at the right time. Foremost, it immediately puts many strategic options on the table that didn't exist before.
In fact, value from that acquisition may already be accruing. In July, SAPX announced commencing its first project under new management, a documentary about the music industry created by respected industry veteran and Seven Arts Music associate Thom Hazaert. While not much detail is public about the project, it indicates that SAPX is in motion. And from an investor's perspective, that's an important distinction from most other nano-cap companies.
Keep in mind, too, SAPX deserves to be given value from its impressive catalog of music and films. Currently, that doesn't seem to be the case. By the way, check its production titles under management at the SAPX website. Many of the selections are mainstream titles that can provide long-term residual revenues.
The Industry's Change Benefits SAPX
Also, underscore the fact that SAPX can emerge well-positioned to expedite its growth by taking advantage of a dramatically changing industry due to the impact of COVID-19.
Now, instead of theater premiers, movies and videos are going straight to on-demand, with even the biggest stars in the business doing productions for streaming services. And while actors may be losing one-time enormous paydays, for SAPX, the move toward streaming makes them a potentially significant niche player in an industry that used to have incredibly high barriers to entry.
By the way, SAPX already has top-tier distribution relationships. And they are no small players. Its list includes the most prominent networks in the world, pushing video content through broadcast networks like HBO, Scripts Network, NBC, CBS, and Fox. Its streaming partnerships are equally impressive, with agreements made with Netflix, Youtube, Vimeo, Hulu, AMC, and more.
Even better, the COVID-forced changes connect SAPX with streaming networks to license content that wasn't available to Seven Arts before its new CEO reinvigorated the company mission. Hence, adding together the multiple opportunities in play, SAPX looks better positioned than ever to benefit from new sources of revenue in the back half of 2021.
Still, there's more to like.
A Plan To Produce
Maybe the best part of SAPX going forward is its working from a business plan that maximizes revenues by controlling projects from start to finish. Notably, and equally important, SAPX sources its talent from members, screenwriters, and actors guilds for its script and acting content. For non-script content, SAPX says it will turn to IATSE editors. In the business, that's a big deal. But industry-friendly script production is only one part of the equation.
SAP expects to take on the production role as well. There, the company utilizes its assets to create compelling content and brings it to life so that its audience can appreciate it at every level. That includes actors involved, screen production quality, music score, and location. And with its state-of-the-art facilitates, producers can tap into one of the hottest markets to produce locally.
Of course, the most outstanding script and the best production alone don't generate revenues. It needs distribution. To maximize that step in the process, SAPX plans to distribute its content through streaming services, web releases, and even occasional theatrical blockbusters. The combined result is that from start to finish, SAPX substantially increases its chances for profitable production. And that's an advantage over many in the space.
Now knowing the SAPX package, is its nano-cap price concealing value? Many investors say yes.
Value Put Into Play
Moreover, besides believing yes, those investors expect SAPX to close the gap between its share price and its intrinsic value in the coming weeks. And there could be a lot of space to fill. Indeed, with filings getting current, fees being paid, new management already making deals, and an acquisition strategy creating value, SAPX stock looks more than undervalued. It seems substantially undervalued.
Still, knowing that more work needs to get done, its current price reflects a few clouds overhead. That's fair. However, as those clouds of uncertainty evaporate, the share price will likely move higher in tandem. Last week showed that process in play. A positive update from management could accelerate the pace.
Thus, SAPX, especially at these levels, is an attractive, perhaps compelling, investment proposition. And if the adage "price movement precedes news" is accurate, last week's 30% increase may be a prelude to better things to come. At the very least, it's a bullish indicator to rely upon. The trend is usually a friend.
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