IPO Update: SOS Hydration Aims For $8 Million IPO (NASDAQ:SOSH)

A Quick Take On SOS Hydration

SOS Hydration Inc. (NASDAQ:SOSH) has filed proposed phrases to lift $8.0 million in gross proceeds from the sale of its frequent stock in an IPO, in line with an amended registration assertion.

The agency produces sports activities drinks with low sugar content material for customers primarily within the U.S.

Given the agency’s declining topline income, worsening losses and money burn and excessive valuation expectations, I’ll move on the IPO.

SOS Hydration Overview

Longmont, Colorado-based SOS Hydration Inc. was based to develop low-sugar hydration drinks containing electrolytes for customers with energetic life.

Management is headed by co-founder, president and CEO James Mayo, who has been with the agency since its inception in 2013 and was beforehand Executive Director at Michael Page International.

The firm’s major choices embrace:

• Fast-hydrating powders

• Ready-to-drink hydration

• Immunity drinks

• SOS Kids.

SOS has booked truthful market worth funding of $24.2 million as of December 31, 2022, from numerous traders.

SOS – Customer Acquisition

The agency sells its merchandise by over 9,000 retail areas by relationships with Walmart, CVS, Kroger and Whole Foods in addition to on-line by main ecommerce web sites.

It seems the variety of areas the agency’s merchandise are bought by has dropped from a earlier determine of 12,000 as of a 2021 S-1 submitting to the present 9,000, or a drop of 25%.

SOS additionally sells by its direct-to-consumer web site and seeks to function by an ‘asset mild’ mannequin the place it doesn’t personal or function manufacturing or subtle distribution services.

General & Administrative bills as a share of complete income have risen sharply as revenues have decreased, because the figures under point out:

Click to enlarge

(Source – SEC.)

The General & Administrative effectivity price, outlined as what number of {dollars} of further new income are generated by every greenback of General & Administrative spend, fell to damaging (0.1x) in the latest reporting interval. (Source – SEC.)

SOS’ Market & Competition

According to a 2019 market research report by Grand View Research, the worldwide market for sports activities drinks was an estimated $22.4 billion in 2018 and is predicted to see vital development by 2025.

The U.S. sports activities drink market is projected to develop at a CAGR of seven.8% from 2019 to 2025.

The primary drivers for this anticipated development are an growing consciousness by customers of hydration choices and the rising distribution of merchandise within the class.

Also, under is a historic and projected future market measurement trajectory within the U.S.:

Major aggressive or different business members embrace:

• PepsiCo

• Coca-Cola

• Sportade

• Pocari

• 100Plus

• Lucozade

• Others.

SOS Hydration Financial Performance

The firm’s latest monetary outcomes may be summarized as follows:

• Declining topline income

• Reduced gross revenue and gross margin

• Increased working losses

• Higher money utilized in operations.

Below are related monetary outcomes derived from the agency’s registration assertion:

Click to enlarge

(Source – SEC.)

As of December 31, 2022, SOS had $690,996 in money and $3.2 million in complete liabilities.

Free money circulate through the twelve months ended December 31, 2022, was damaging ($5.5 million).

SOS Hydration’s IPO Details

SOSH intends to promote 1.6 million shares of frequent stock at a proposed midpoint value of $5.00 per share for gross proceeds of roughly $8.0 million, not together with the sale of customary underwriter choices.

No present or probably new shareholders have indicated an curiosity in buying shares on the IPO value.

Assuming a profitable IPO on the midpoint of the proposed value vary, the corporate’s enterprise worth at IPO (excluding underwriter choices) would approximate $39.8 million.

The float to excellent shares ratio (excluding underwriter choices) will likely be roughly 16.84%. A determine underneath 10% is mostly thought of a “low float” stock which may be topic to vital value volatility.

Per the agency’s most up-to-date regulatory submitting, it plans to make use of the web proceeds as follows:

Management’s presentation of the corporate roadshow isn’t accessible.

The firm isn’t presently a celebration to any authorized proceedings, per the latest regulatory submitting.

The firm has not disclosed an underwriter of the IPO but.

Valuation Metrics For SOS Hydration

Below is a desk of the agency’s related capitalization and valuation metrics at IPO, excluding the results of underwriter choices:

Click to enlarge

(Source – SEC.)

Commentary About SOS Hydration

SOS Hydration Inc. is looking for U.S. public capital market funding for its commercialization and ramp-up efforts within the U.S.

The firm’s financials have produced decrease high line income, much less gross revenue and gross margin, greater working losses, and rising money utilized in operations.

Free money circulate for the twelve months ended December 31, 2022, was damaging ($5.5 million).

General & Administrative bills as a share of complete income have grown sharply as income has dropped and its General & Administrative effectivity a number of was damaging (0.1x) in the latest calendar 12 months.

The agency presently plans to pay no dividends on its capital stock and anticipates that it’s going to retain any future earnings for reinvestment again into the agency’s development and operational necessities.

The firm didn’t make any capital expenditures in 2022.

The market alternative for sports activities drinks is massive and anticipated to develop at a reasonable price of development within the coming years.

However, the agency faces massive, entrenched opponents with vital market energy.

Risks to the corporate’s outlook as a public firm embrace altering client tastes for sports activities drink merchandise (as with all client merchandise), a going concern dedication from its auditors and the agency’s skinny capitalization.

As for valuation expectations, administration is asking IPO traders to pay an Enterprise Value / Revenue a number of of 12.9x regardless of declining topline income.

Given SOS Hydration Inc.’s declining topline income, worsening losses and money burn and excessive valuation expectations, I’ll move on the IPO.

Expected IPO Pricing Date: To be introduced

Editor’s Note: This article covers a number of microcap shares. Please concentrate on the dangers related to these shares.