How much is AVCT worth? And what does the recent proposed stalking horse asset agreement mean?

(a) Intrinsic Value

In regards to intrinsic value, as everyone knows, it is based principally on the net present value of expected future cash flow completely independent of any acquisition. This includes tangible resources, intangible resources, as well as projected future growth.

i. Tangible Resources (Physical assets)

The following includes AVCT and its subsidiaries’ assets and liabilities.

- American Virtual Cloud Technologies Inc (Docket 107)

Physical assets - $71,111,964.14
Liabilities - $13,915,102.17


Detailed document: Docket 107:

Physical assets - $17,648,647.47
Liabilities - $53,111,324.74


Detailed document: Docket 108:

Physical assets - $970,160.00
Liabilities - $112,052.00

Detailed document: Docket 109:

Total tangible resources:

Physical assets - Liabilities
= ($71,111,964.14 + $17,648,647.47 + $970,160.00 ) - ($13,915,102.17 + $53,111,324.74 + $112,052.00)
= $89,730,771.61 - $67,138,478.91
= $22,592,292.70

However, do understand that there is a difference between liabilities and debt. Liabilities encompass all of one’s financial obligations while debt is only those obligations associated with outstanding loans, which means debt is just a subset of liabilities, not all liabilities are debt. As reference from the fillings above, there are pre-paid services in liabilities which terms date have not ended and could be utilized by the acquirer without paying more for the services. I won’t go through each of them since it’s a long list but you could take a look if you are curious about it. This means that the tangible resources that AVCT has in total is definitely higher than $22,592,292.70.

(ii) Intangible resources: (Intellectual properties etc.. )

Includes goodwill, patents, trademarks, cpyrights etc… Currently those data are not accessible.

(iii) Projected growth

AVCT is the second largest cloud company while cloud industry is projected to grow at a fast pace.

"On top of the intrinsic value, the market may add a premium to reflect the likelihood that an offer for the company will be made (or a higher offer will be tendered than one currently on the table). Market value—commonly called “current market capitalization”—is the same as the share price; it reflects the market participants’ valuation of the company.”

Current market cap = 24M

(c) Purchase price (Value to target investors)

"Wall Street calls this the “anticipated takeout value.” It’s the price that a bidder anticipates having to pay to be accepted by the target shareholders."

Currently numerous companies have their data in AVCT cloud server, like IBM, Microsoft etc… and have a likelihood of having their services terminated if it is acquired by another company. Moreover, the chance of data leakage is also a possibility. In addition, on Dec 2022, a 9 billion contract was given out to numerous companies in order to strengthen the Dapartment of Defense. With the second largest cloud company’s tech, it could also save them the time and effort, and in addition to enhance their cloud computing.

"The net present value of the cash flows that will result from improvements made when the companies are combined. These are improvements above and beyond those the market already anticipates each company would make if the acquisition didn’t occur, since those are already incorporated into the intrinsic value of each company. "

This is normally calculated through:
- Cost Savings
- Revenue enhancement
- Process improvements
- Financial engineering
- Tax benefits


Thus, once you add them all up, you get a buyout price which increases as the competition arises.

(B) What does the recent proposed stalking horse asset agreement mean?

In recent news, I’m sure many have came across the so called “3Million Stalking Horse Asset Purchase Agreement between Skyvera Llc and AVCT”. So basically that’s a proposed stalking horse purchase or some might called it as the "initial stalking horse bid”. However, there are a few things to know about. Firstly, this is a PROPOSED purchase price which could still be objected. Some might consider it as the minimum stalking horse bid but the thing is until the proposed price is formally accepted in court, it is still a proposed stalking horse bid. The bid deadline is 3 March 2023 with the baseline bid to be on the 6th of March 2023. Before the deadline, companies are able to make initial bids on it with a 10% deposit. Live auction is 7 March 2023, where comapanies will officially compete against each other in buyout price.

Some might wonder about why is the proposed stalking horse asset price so low? So bassically there are two key points. (As mentioned by peeps from Stocktwits)

1. a 3% breakup fee is needed to be given to the Stalking Horse. Thus, the lower the initial stalking horse bid the better.
2. If the final bid price is higher than the stalking horse bid price, the stalking horse obtain a certain % of the buyout price as a compensation for providing time and effort in setting the floor price.