• Cyngn has experienced a lot of volatility late, with some of that built into the company because of its absence of revenue.
• Despite having no revenue, the firm has a solid balance sheet and it has a unique and potentially valuable vision.
• Though speculative, the company has gained further legitimacy and is worth looking into because of some recent developments.

One fairly large market that must exist in order for the modern economy to function is the industrial vehicle market. Forecasted to reach $80 billion in size by 2023, this industry offers attractive prospects for the right kind of companies that can add value in unique and innovative ways. One company dedicated to providing such value is Cyngn (NASDAQ:CYN). With a special emphasis on software that it hopes will help industrial vehicles to achieve autonomous functionality, there is the potential for the business to grow at a rapid pace and to generate attractive margins. Today, the company is still very much early stage. But given recent developments and the company’s long-term vision, it might make sense for some investors, those dedicated to the growth ideology, to consider a stake in the enterprise at this time.

An innovative play on industrial technology

If I could state one overarching goal as the goal set by the management team at Cyngn, it would be for the company to become a significant player in the industrial software market. The business operates by integrating their full-stack, autonomous driving software, known as DriveMod, on two vehicles that are manufactured by OEM customers. This integration can be done either by retrofitting existing vehicles or by integrating into them during their assembly. The core to the company’s vision is its Enterprise Autonomy Suite to be compatible with sensors and components from other hardware firms for the purpose of collecting and analyzing data from them. Using its Cyngn Insight technology, which operates as an intelligent Control Center, the company hopes to provide fleet management analytics, teleoperation, and diagnostics. On top of this, the company also has an aspect to its business called Cyngn Evolve, which provides a wide variety of data optimization tools like performance analytics, simulations, machine learning infrastructure, and more. These, as well as DriveMod, all fall under the Enterprise Autonomy Suite.

Long term, the company’s vision is for its Enterprise Autonomy Suite to become a universal autonomous driving solution for customers for the purpose of optimizing efficiency and reducing operating costs. To be very clear, management’s intentions have been stated boldly. In an investor presentation, the company said that its goal is to reduce the high costs associated with human labor. Already, there are an estimated 900,000 material handlers, stock pickers, and industrial vehicle drivers across the US alone, with about $140 billion spent annually on human labor throughout the 20,000 warehouses in the country. In addition, there also appears to be a shortage of workers for this space, with the company even saying that 73% of supply chain and manufacturing leaders attest to the statement that it requires 30 or more days to fill open positions. Add on top of this the estimated $171 billion in preventable workplace injuries that exist across the US every year, and it becomes clear how the idea of autonomous vehicles could be appealing to many.

Recently, shares in the business have been rather volatile. On May 5th alone, the company’s stock surged higher, closing for the day up 18%. There was no clear or obvious news that came out during that day. Instead, this move higher was likely a result of a development that was announced on May 4th. In short, the company launched a new product called Infinitracker. This device serves as a GPS asset tracker and IoT (Internet of Things) platform that management says can be placed on almost any industrial asset. The goal of this device is to provide real-time location, speed, temperature, and direction of travel data for the asset it is paired up with. Using Bluetooth, the device can also collect data from other sensors, send it to the company’s cloud platform, and analyze it for various purposes. Although this technology is not new in and of itself, what is remarkable is management’s claim that the battery only needs changed or charged about once every 15 years.

Though this may seem like a significant departure from the company’s core vision, it does actually fit with the software-oriented business model the company has been focused on. Operations aside, it’s also remarkable because of its ability to generate revenue for the company today. In both 2020 and 2021, the company generated no revenue. Its net losses in 2020 and 2021 were $8.34 million and $7.80 million, respectively. Meanwhile, operating cash flows were negative to the tune of $7.92 million and $8.64 million, respectively, during these time frames. For a fee of $300 for the first three years of operation per unit, as well as a $10 per month charge thereafter, this device has the potential to generate some significant value for the business if it gains enough traction.

There was one other development for the company, but that took place on April 29th. On that date, the business announced the closing of a private placement of stock that ultimately brought in gross proceeds of $20 million. The business ended up issuing 6.45 million shares in exchange for this, implying a price per share of $3.10. Some of these units, it should be said, were actually pre-funded warrants. But that has little in the way of meaning in the grand scheme of things. Adjusting for this share issuance, the company should have around $42 million in cash as of this writing. It has no debt on hand and a market capitalization of $125.46 million. That implies an enterprise value of $83.47 million.

Takeaway

Conceptually speaking, Cyngn seems to be an interesting business with some attractive potential in the long run. I generally don’t like companies that are pre-revenue and that are generating significant losses and cash outflows. But the absence of debt and the significant amount of cash on hand, combined with the new product release, suggests to me that there could be something here. I am unlikely to buy shares in the company still. But I can understand why many growth-oriented investors who want to capture the upside associated with the industrial software space would be drawn to this firm.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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• Cyngn is an autonomous vehicle technology company which listed on NASDAQ in October 2021 through a $26.3 million IPO.
• The company is spending only around $5 million on R&D per year, and I doubt it will be able to achieve its ambitious growth plans.
• Cyngn’s market valuation has more than tripled over the past week and I think the reason behind this is high retail investor interest.
• In my view, the share price is likely to fall back to below $1.50 in the near future as retail investor interest gradually fades off.

Investment thesis

I like browsing the trending stocks on Fintwit because I think that among them there are often microcap stocks whose market valuations have soared due to retail investor interest, which seldom last for long. Today, I want to talk about Cyngn (NASDAQ:CYN) which has 25 mentions over the past 24 hours as of the time of writing. The company’s market valuation has more than tripled over the past week and I think the fundamentals just aren’t there at the moment. Let’s review.

Overview of the business and financials

Cyngn is involved in the development of industrial mobile robot automation software. The company’s technology is a combination of robo taxi-level autonomous driving software, off-the-shelf leading hardware, and precise analytics, and the focus is on things like forklifts. Its offering can be split into three main products, namely DriveMod (autonomous driving software), Cyngn Insight (tools for managing AV fleets), and Cyngn Evolve (AI training). The company says that it has been operating autonomous vehicles in production environments since 2017.

In October 2021, Cyngn raised $26.3 million in an initial public offering (IPO) on NASDAQ after issuing 3.5 million shares at $7.50 per share. I consider the IPO somewhat underwhelming considering the assumed issue price in the prospectus was $8.50 per share. Unfortunately for investors, the company’s share price performance hasn’t been good since then.

You see, Cyngn is still a development-stage company, and it expects to begin scaled deployments of its Enterprise Autonomy Suite (EAS) in 2024. And in an environment of rising interest rates, the market is shunning tech companies that are far from commercial production.

Looking at the latest available financial data, we can see that Cyngn had operating expenses of $9.4 million in 2021, split almost equally between research and development and general and administrative expenses. The sum is about $1 million higher than in 2020 as a result of an increase in stock-based compensation and costs related to the IPO.

As of December 2021, Cyngn had $21.9 million in cash and cash equivalents, and this means the company is well funded for about two years, just until its EAS should start deployment. According to the IPO prospectus, the estimated costs to prepare the EAS for scaled commercialization are roughly $18-$23 million.

So, how do the prospects for Cyngn look in 2024 and beyond? Well, I think they aren’t particularly good. Sure, the industrial equipment market is huge and is projected to reach $200 billion by 2027. Cyngn mentioned in its IPO prospectus that it has been paid $166,000 for one deployment and the company plans to deliver thousands of vehicles by 2024.

However, Cyngn is a small company with limited research and development investment that is up against several large competitors that are worth billions of dollars at the moment. In my view, this is a David and Goliath story and I don’t think the company’s ambitious growth targets are achievable.

Yet, the market valuation of Cyngn has more than tripled over the past week and the catalyst for this seems to be an announcement about the launch of a turnkey autonomous vehicle solution named DriveMod Kit. The company originally developed this product for Columbia Vehicle Group’s Stockchaser vehicles and it’s unclear how much revenue it can bring in. However, this announcement alone seems to have been more than enough to attract significant retail investor interest as there are also a large number of posts about Cyngn on websites like Twitter, and StockTwits. On YouTube, the company is being covered by several stock trading channels, including Warrior Trading, Jonny Love, StocksToTrade, ClayTrader, Viral Stocks, Alex Winkler, 9 Year Millionaire, Don Leo Trades, W.S. Trades Analysis, and Mighty Scalper. Note that Cyngn isn’t doing the promotion of its business or shares itself, but this is being done by a large number of private investors and traders.

In my view, the launch of DriveMod Kit doesn’t change the prospects of Cyngn’s business in a major way and I think that the share price of the company is likely to return to below $1.50 apiece in the near future as retail investor interest fades off. I’m bearish but unfortunately, there are still no put options on Cyngn, and data from Fintel shows that the short borrow fee rate stands at 238.43% as of the time of writing.

Looking at the risks for the bear case, I think there are two major ones. First, I could be wrong about the potential of Cyngn’s products, and the company somehow ends up triumphing against the likes of TuSimple (TSP). Second, meme stocks are often unpredictable and it’s possible that the share price of Cyngn remains high despite little progress on its operations.

Investor takeaway

I view Cyngn as a small industrial automation software company that is unlikely to meet its ambitious growth plans due to its small investment in research and development as well as the caliber of its competition. The company’s share price had been falling since the October 2021 IPO as the tech sector is out of favor at the moment, but it has more than tripled in the past week. I think that the likely reason behind this is strong retail investor interest which I expect to gradually fade off. In light of this, I expect Cyngn’s share price to return to below $1.50 in about a month or two.

Unfortunately, short selling seems dangerous as there are no put options available and the short borrow fee rate stands at over 200%. In my view, it could be best for investors to avoid Cyngn for now. At least until the short borrow fee rate drops to double digits.

Author’s Note: Thank you for reading my analysis. Please note that I will be launching a marketplace service named Bears and Resources soon. I plan to share my live portfolio and my shortlist, and discuss exclusive investment ideas. Early subscribers will receive a legacy discount. Stay tuned for more details.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am not a financial adviser. All articles are my opinion – they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Cyngn Looks Overvalued Based On Fundamentals appeared first on Up2info.com.

• Cyngn has filed proposed terms for a $30 million IPO.
• The firm is developing mobile robot automation software for industrial use cases.
• CYN is still in development stage, has no revenue and the IPO is unusual for a company of its type.

Quick Take

Cyngn (NASDAQ:CYN) has filed to raise $30 million from the sale of its common stock in an IPO, according to an amended registration statement.

The company is developing industrial mobile robot automation software.

The IPO is unusual given the firm’s lack of revenue for a non-life science company seeking public investment, so I’ll watch the IPO from the sidelines.

Company & Technology

Menlo Park, California-based Cyngn was founded to help automate industrial vehicle fleet operations across a range of environments via its software.

Management is headed by Chairman and CEO Lior Tal, who has been with the firm since 2016 and was previously director of international growth and partnerships at Facebook.

Below is a brief overview video of the firm’s DriveMod software in action:

(Source)

The company’s primary offerings include:

• DriveMod – autonomous driving software

• Cyngn Insight – Tool suite for managing AV fleets

• Cyngn Evolve – AI training

Cyngn has received at least $114 million in equity investment from investors including Benchmark Capital, Andreessen Horowitz, Redpoint Ventures and PI International Holdings.

The firm seeks relationships with OEM vehicle companies that can integrate its DriveMod software into manufactured vehicles during assembly; also the firm can retrofit its software to already-built vehicles.

The company has generated only a small amount of revenue, back in calendar year 2019.

Market & Competition

According to a 2021 market research report by Grand View Research, the global market for autonomous mobile robots was an estimated $1.9 billion in 2019 and is forecast to reach $8 billion by 2027.

This represents a forecast CAGR of 19.6% from 2020 to 2027.

The main drivers for this expected growth are a demand for increased operating efficiencies and reduced employee safety problems.

Also, below is a chart showing the historical and projected future growth trajectory of autonomous mobile robots in Asia:

(Source)

Major competitive or other industry participants include:

• ABB

• Bleum

• Boston Dynamics

• Clearpath Robotics

• GreyOrange

• Harvest Automation

• IAM Robotics

• inVia Robotics

• Kuka AG

• Teradyne

Financial Performance

Cyngn’s recent financial results can be summarized as no recent revenue and significant R&D and G&A expenses:

Below are relevant recent financial results derived from the firm’s registration statement:

(Source)

As of June 30, 2021, Cyngn had $3.4 million in cash and $2 million in total liabilities.

Free cash flow during the six months ended June 30, 2021, was negative ($3.6 million).

IPO Details

CYN intends to sell 3.5 million shares of common stock at a proposed midpoint price of $8.50 per share for gross proceeds of approximately $30 million, not including the sale of customary underwriter options.

No existing or potentially new shareholders have indicated an interest to purchase shares at the IPO price.

Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO (ex- underwriter options) would approximate $196 million.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 13.34%. A figure under 10% is generally considered a ‘low float’ stock which can be subject to significant price volatility.

Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:

We currently intend to use the net proceeds we receive from this offering for working capital and other general corporate purposes, including funding our operating needs. However, we do not currently have specific planned uses for the proceeds.

(Source)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management said the firm is not a party to any claim or proceeding that would have a material effect on its business.

The sole listed bookrunner of the IPO is Aegis Capital Corp.

Valuation Metrics

Below is a table of the firm’s relevant capitalization and valuation metrics at IPO, excluding the effects of underwriter options:

Click to enlarge

(Source)

As a reference, a potential partial public comparable would be Kuka AG (OTCPK:KUKAF), which has a current enterprise value of $2.57 billion.

Commentary

CYN is seeking public market investment to continue its software development efforts.

The firm’s financials show no revenue since booking a small amount of revenue in 2019.

Free cash flow for the six months ended June 30, 2021 was negative ($3.6 million).

The market opportunity for autonomous mobile robots in an industrial setting is large and expected to grow at a significant rate, so the firm will benefit from strong industry growth dynamics in the years ahead.

Aegis Capital is the sole underwriter and the IPO led by the firm over the last 12-month period has generated a return of negative (12.1%) since its IPO. This is a bottom-tier performance for all major underwriters during the period.

The primary risk to the company’s outlook is its development stage of operation as the firm currently has no revenue generation.

This IPO is a curious one, as there are several top tier venture capital firms as investors who would be expected to continue to invest in the firm privately so that it could achieve significant revenue production before going to public markets.

Also, the choice of Aegis Capital, a bottom tier underwriter with little activity, is uncommon for a firm backed by top tier VCs.

I can only assume that the existing investors don’t wish to continue their investment or management wants to diversify its investor base to public investors.

At any rate, the IPO is an odd one and given the firm’s lack of revenue which is unusual for a non-life science company seeking public investment, so I’ll watch it from the sidelines.

Expected IPO Pricing Date: Month of October, 2021.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Investing in IPOs is an inherently volatile and opaque endeavor. My research is focused on identifying quality IPO companies at a reasonable price, but I’m wrong sometimes. I analyze fundamental company performance and my conclusions may not be relevant for first-day or early IPO trading activity, which can be highly volatile and unrelated to company fundamentals. This report is intended for educational purposes only and is not financial, legal or investment advice.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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The post IPO Update: Cyngn Targets $30 Million IPO appeared first on Up2info.com.

• Cyngn has filed to raise $35 million in an IPO from the sale of its common stock.
• The firm is developing software for industrial mobile autonomous robot vehicles.
• CYN is still at the development stage for its software solutions.

Quick Take

Cyngn (NASDAQ:CYN) has filed to raise $35 million in an IPO of its common stock, according to an S-1 registration statement.

The firm develops software that helps create autonomous driving fleet activity for industrial fleets.

CYN isn’t currently generating revenue and is still in development for its software solutions.

When we learn more about the firm’s valuation and pricing expectations, I’ll provide a final opinion.

Company & Technology

Menlo Park, California-based Cyngn was founded to help automate industrial vehicle fleet operations across a range of environments via its software.

Management is headed by Chairman and CEO Lior Tal, who has been with the firm since 2016 and was previously director of international growth and partnerships at Facebook.

Below is a brief overview video of the firm’s DriveMod software in action:

(Source)

The company’s primary offerings include:

• DriveMod – autonomous driving software

• Cyngn Insight – Tool suite for managing AV fleets

• Cyngn Evolve – AI training

Cyngn has received at least $114 million in equity investment from investors including Benchmark Capital, Andreessen Horowitz, Redpoint Ventures and PI International Holdings.

The firm seeks relationships with OEM vehicle companies that can integrate its DriveMod software into manufactured vehicles during assembly; also the firm can retrofit its software to already-built vehicles.

The company has generated only a small amount of revenue, back in calendar year 2019.

Market & Competition

According to a 2021 market research report by Grand View Research, the global market for autonomous mobile robots was an estimated $1.9 billion in 2019 and is forecast to reach $8 billion by 2027.

This represents a forecast CAGR of 19.6% from 2020 to 2027.

The main drivers for this expected growth are a demand for increased operating efficiencies and reduced employee safety problems.

Also, below is a chart showing the historical and projected future growth trajectory of autonomous mobile robots in Asia:

(Source)

Major competitive or other industry participants include:

• ABB

• Bleum

• Boston Dynamics

• Clearpath Robotics

• GreyOrange

• Harvest Automation

• IAM Robotics

• inVia Robotics

• Kuka AG

• Teradyne

Financial Performance

Cyngn’s recent financial results can be summarized as no recent revenue and significant R&D and G&A expenses:

Below are relevant recent financial results derived from the firm’s registration statement:

(Source)

As of June 30, 2021, Cyngn had $3.4 million in cash and $2 million in total liabilities.

Free cash flow during the six months ended June 30, 2021, was negative ($3.6 million).

IPO Details

Cyngn intends to raise $35 million in gross proceeds from an IPO of its common stock, although the final figure may vary.

No existing shareholders have indicated an interest to purchase shares at the IPO price.

Management says it will use the net proceeds from the IPO as follows:

The principal purposes of this offering are to increase our capitalization and financial flexibility, and create a public market for our common stock. We currently intend to use the net proceeds we receive from this offering for working capital and other general corporate purposes, including funding our operating needs. However, we do not currently have specific planned uses for the proceeds.

(Source)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management said the firm is not a party to any claim or proceeding that would have a material effect on its business.

The sole listed bookrunner of the IPO is Aegis Capital Corp.

Commentary

Cyngn is seeking to go public for its unspecified corporate expansion initiatives.

The firm’s financials show no revenue since a little revenue in 2019.

Free cash flow for the six months ended June 30, 2021 was negative ($3.6 million).

The market opportunity for autonomous mobile robots in an industrial setting is large and expected to grow at a significant rate, so the firm will benefit from strong industry growth dynamics in the years ahead.

Aegis Capital is the sole underwriter and the two IPOs led by the firm over the last 12-month period have generated an average return of 323.8% since their IPO. This is a top-tier performance for all major underwriters during the period.

The primary risk to the company’s outlook is the still early stage of development of the firm’s software technologies, especially with respect to the many product ‘handling edge cases, unique environments, and discrete object’ handling challenges.

When we learn more about the firm’s valuation and pricing expectations, I’ll provide a final opinion.

Expected IPO Pricing Date: To be announced.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Investing in IPOs is an inherently volatile and opaque endeavor. My research is focused on identifying quality IPO companies at a reasonable price, but I’m wrong sometimes. I analyze fundamental company performance and my conclusions may not be relevant for first-day or early IPO trading activity, which can be highly volatile and unrelated to company fundamentals. This report is intended for educational purposes only and is not financial, legal or investment advice.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Gain Insight and actionable information on U.S. IPOs with IPO Edge research.

Members of IPO Edge get the latest IPO research, news, and industry analysis.

Get started with a free trial!

The post Cyngn Aims For $35 Million U.S. IPO appeared first on Up2info.com.